Back in September 2024 I wrote When to Sell. I closed it with a question: could we surface the bottom of the CSR list — the S&P 500 names with aggregate bearish sentiment? Three months later in The Five Stages of Decline I closed with a related one: could publicly available data tell us when companies are transitioning through Collins' five stages of decline?
Both questions sat open for about a year. The team and I have been making good on the implicit promise. Today is the answer.
The answer is CoS — Convergence on Sell. CoS is the mirror of our Convergent Stock Rating (CSR). Where CSR identifies the S&P 500 names the analyst ecosystem converges up on, CoS identifies the names it converges down on, paired with quantifiable evidence of fundamental decline. CSR answers the buy question. CoS answers the harder one: when to exit.
Last Sunday in Going Wider we talked about Buffett's favorite holding period being forever. CoS is for the rare moment that overrides it.
Collins' insight in How the Mighty Fall is that great companies don't fall all at once. They go through stages, and the early ones look strong from the outside — record sales, glossy press — while the sickness has already set in. CoS is the data lens on that moment, when fundamentals have turned but the analyst crowd hasn't caught up.
Why aggregation matters. Sell calls from any single analyst source are rare. Fewer than 1% of all ratings issued. No source produces enough alone to build a workable screen. The work is in the synthesis. Aggregate the full multi-source rating ecosystem and the rare Sell calls add up to something usable. That is what CSR has been doing for the buy side from day one. CoS does the same on the sell side.
We backtested CoS 30 months. The basket of names it flags underperformed the broader universe by ~8 percentage points a year, every calendar year of the test.
The example sitting at the top of this week's flag list is Intel (INTC).
Note: Intel currently flags on CoS. CSR of 2.7 (we stop buying at 4.5). Profit margin of -5.9%. ROIC of -2.06%. PEG of 18.27. About $4 million of net insider selling over the trailing three months. Zero of 10 analyst sources rating it Sell.
Every operational signal is pointing the same direction. The analyst crowd has not caught up. That gap is exactly the information CoS is built to surface.
To be clear about what CoS is and is not. It’s an observation product, not a recommendation. We're showing you what the data is flagging and the methodology behind it, not telling you to short Intel. The override belongs to you. Be sure to do your own research.
"Decline can be avoided. Decline can be detected. Decline can be reversed."— Jim Collins
That middle clause, decline can be detected, is what CoS is built to do.
More on methodology in a future note.
P.S. I'm sharing some investment information, but it's important to remember that what I'm providing is for informational purposes only and should not be construed as financial advice.
Happy Investing,
John
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