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Stock Screening (Part One) - setting up a basic value screen

Sunday, Feb 10 2013 by
19

I've only recently started playing with Stockopedia's powerful stock screening functionality, and I thought this would make a good subject area for a short series of articles.

For the last 15 years I have used stock screening systems on other websites to trawl for investment ideas, usually doing something fairly basic, such as looking for shares with a low PER, a decent dividend yield, and net cash.

It's quick and easy to do that, so for anyone not familiar with the process (or maybe familiar, but not used to Stockopedia), I will demonstrate it in this first article, using screen grabs from Stockopedia's screening system.

 

Step 1: The Screening Centre

 

 

This is Stockopedia's home page.

Click where shown.

 

 

 

 

 

 

 

 

Step 2: Launch the Screener

 

 

Click where shown to create a new Stock Screen (i.e. a stock filter)

 

 

 

 

 

 

 

 

Step 3 - Build your own Screen

 

Create your Screen!

In this Screen I have chosen the following rules to identify value small cap shares:

PER < 10
Dividend Yield  > 4%
Net Debt < 0 (i.e. has net cash)
Market Cap between £5m-300m 

The trick is to start simple, and take it step by step. A bit of perseverence, with trial & error, pays off.

 

Then just hit the blue button to see the results.

 

 Special Offer: Invest like Buffett, Slater and Greenblatt. Click here for details »

 

Step 4: The Results

So here are the results (you might need to increase the zoom on your browser to view clearly):

 

The results above have given us a shortlist of 12 qualifying shares, which means we can focus our energies on this small number of shares to research, instead of having to research every share in the market.

You can also easily customise how the results are presented, note the different tabs above.

 

Step 5 - Initial Review

Work through each share in turn, doing a quick initial review to further weed out unattractive shares. Bear in mind that value screens such as this will throw up "value traps", i.e. companies which appear to be cheap, but are cheap for a reason (ie. something is wrong with the underlying business, hence why the shares are cheap).

Every now and again though, you will find a share that is irrationally cheap, and which may be out of fashion now, but which presents good or great investing upside. My big success for 2012 was Trinity Mirror (LON:TNI), which I flagged here as being irrationally cheap at 25p (they are now 109p!).

 

OK, let's review the results, one by one.

Zhejiang Expressway Co (LON:ZHEH)
I don't touch any Chinese companies, because their entire economy is based on artificial accounting, where bad debts are never crystallised, which rules out all Chinese companies for me as potential investments.

Quercus Publishing (OFEX:QUPP)
This looks potentially interesting, so it goes on my shortlist.

Printing.com (LON:PDC)
This company is well known to me. It pays out all its earnings in dividends, but I have doubts about the longer term business model. It's time to look at it again, so it can go on the shortlist.

Nationwide Accident Repair Services (LON:NARS)
Another high dividend payer, but they used (in my view) a legal, but highly misleading accounting treatment of their pension deficit, which turned a large liability into a fictitious asset on their balance sheet. So I'm not touching this one until their accounts have been restated under new pension accounting rules.

Densitron Technologies (LON:DSN)
Another one that I've looked at numerous times over the years, and it might be worth another look, so it's going on the shortlist. They own some land in Blackheath too.

RM (LON:RM.)
A supplier of educational supplies. I seem to recall something went badly wrong in the past, so I'll look into it in more depth. On the shortlist.

Interior Services (LON:ISG)
Construction company that operates on absolutely wafer thin profit margins, therefore quite high risk. I'll check it out again though. On the list.

Randall and Quilter Investment Holdings (LON:RQIH)
Financial sector share, which I don't cover, so not on my shortlist.

Costain (LON:COST)
Another low margin construction company, so a sector I don't like, and the PER isn't particularly low, nor the divi especially high, so doesn't interest me.

Bloomsbury Publishing (LON:BMY)
Book publishers which keeps cropping up on my stock screens, so this is high on the shortlist.

Motivcom (LON:MCM)
Not looked at this before, potentially interesting, so it's on the shortlist.

MDM Engineering (LON:MDM)
Overseas resource sector company, so doesn't interest me.

 

 

Step 6 - Final Shortlist

We now have a final shortlist of shares to research in detail which is as follows:

Quercus Publishing (OFEX:QUPP)
Densitron Technologies (LON:DSN)
Bloomsbury Publishing (LON:BMY)
Motivcom (LON:MCM)

Runners-up, which might be worth a look, but I'm initially lukewarm about are:

Printing.com (LON:PDC)
RM (LON:RM.)
Interior Services (LON:ISG)

 

Having done this initial value stock screen, my next article will use stock screening to explore how the Piotroski method of stock selection works (which the founders of Stockopedia are particularly keen on, and which is given prominence in individual company StockReports on this site).

There are some excellent guides here to help with stock screening, and I recommend this accessible guide to using the "GuruModel" Screeners here.

Also some useful FAQ on stock screening can be found here.

 

Please feel free to put your questions, comments, discussion, etc, in the comments section below. I will be happy to respond there. Also, if anyone wants to follow up on the stocks mentioned in this article, and post your findings here, then please be my guest. Did this value stock screen produce any useful results, or not? What do you think? How might it be improved?

Regards, Paul.

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Quercus Publishing plc is book publisher for retail and digital distribution, contract and co-edition sales, and rights sales. The Company publishes fiction, children’s, non-fiction and illustrated non-fiction books. During the year ended December 31, 2011, the Swedish writing duo Roslund and Hellstrom’s Three Seconds launched in the United States market, through the joint venture imprint Silver Oak. The books published by the Company include Tiny Sunbirds, Far Away; The Dinosaur Feather; The Black House; The Girl With the Dragon Tattoo; The King’s Speech; Prague Fatal; A Cold Season; Mountain High; Mountain High Until Thy Wrath be Past; Dea Men Risen; The Rose Petal Beach; Island of Wings; Lord of Misrule, and Unhooking the Moon, among others. The Company’s subsidiaries include Quercus Editions Limited, which is a publishing company, and Quercus Books Limited, which is dormant. During 2011, the Company’s E-book sales generated 11% of revenue. more »

Share Price (ISD)
n/a
Change
0.0  0.0%
P/E (fwd)
n/a
Yield (fwd)
n/a
Mkt Cap (£m)
n/a

Densitron Technologies plc is engaged in the design, development and delivery of display technologies and related electronics on an international basis. The Company’s product includes Organic Light-Emitting Diode (OLED), Thin-Film Transistor, Liquid Crystal Display (LCD) Module and LCD Glass, Touchscreen Displays and E-Paper or E-Ink Displays. The primary customer for the Company is an Original Equipment Manufacturer that has a small to medium sized requirement for electronic displays. The Company’s geographical segment includes Europe, The United Kingdom, France, Nordic and Germany. The Company’s subsidiaries include Densitron Europe Ltd, Densitron Corporation of Japan, Densitron Corporation, Densitron France, Densitron Deutschland GmbH and Densitron Land Ltd. In March 2014, Densitron Technologies plc launched its new subsidiary Densipaper. more »

Share Price (AIM)
6.1p
Change
-0.1  -2.0%
P/E (fwd)
6.9
Yield (fwd)
n/a
Mkt Cap (£m)
4.2

Bloomsbury Publishing Plc is engaged in the publication of books, the development of electronic information products and reference databases, the provision of managed services and related activities. The Company operates in four divisions: Adult, Children’s & Educational, Academic & Professional and Information. Bloomsbury Academic & Professional division specializes in the humanities, social sciences, law and tax. The Adult division publishes globally in English for readers of fiction, biography, sport, food and drink, general reference and special interests, such as yachting and ornithology. The Company’s Children’s & Educational publishing division includes the Bloomsbury Children’s Books trade lists in both United Kingdom and the United States, and the Walker Books for young readers imprint in the United States. Information’s focus is on the provision of publishing management services and the development of digital knowledge hubs for third-party partners. more »

Share Price (Full)
177.5p
Change
1.3  0.7%
P/E (fwd)
13.4
Yield (fwd)
3.5
Mkt Cap (£m)
130.2



  Is Quercus Publishing fundamentally strong or weak? Find out More »


13 Comments on this Article show/hide all

peterg 10th Feb '13 1 of 13
2

Great article, Paul. Thanks

Peter

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cadmunkey 10th Feb '13 2 of 13
1

Good stuff Paul, looking forward to the next part. (Bloomsbury does seem worth looking at!)

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Paul Scott 10th Feb '13 3 of 13
1

In reply to cadmunkey, post #2

Cheers, glad you liked it. I'll probably do Part 2 next weekend, as it's a good time to concentrate without the distraction of the markets being open!
P.

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rbf 11th Feb '13 4 of 13
1

Hi Paul

A week or so ago you mentioned AGL and said you would do a more detailed follow-up after meeting management. Perhaps I missed it...or perhaps it is still to come? But would certainly be interested in your thoughts on this company

Thanks

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Ramridge 11th Feb '13 5 of 13

Hi Paul. About Chinese shares. I share your view about their opaque accounting. I bought a few Camkids shares but not happy about their gyrations since launch. You have tipped me into selling them asap. Shame to lose the growth potential though. Regards. Ram

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Paul Scott 11th Feb '13 6 of 13

In reply to rbf, post #4

Hi rbf,

Unfortunately I was not able to attend the planned lunch meeting with Angle (LON:AGL), as the trains from Brighton/Hove to London were being cancelled/long delays that day, due to a broken down train at Haywards Heath (which apparently brings the entire line to a standstill).
As I normally finish these reports about 10am, it's a tight timescale for me to get to London for 12:30 meetings, so when trains are late not possible.

Sorry about that.

Regards, Paul.

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Paul Scott 11th Feb '13 7 of 13

In reply to Ramridge, post #5

The trouble with Chinese companies is that the accounting is worse than opaque, it's semi-fictitious. Debtors & creditors are not arms length transactions, and they only settle them very long term, with potentially vast bad debts hidden throughout the economy in many companies and Banks balance sheets, but never crystallised.

Some commentators believe that Chinese annual GDP growth of 8% is really nearer 3-5% if they were to properly account for bad debts along the way. So at some point there will the most gigantic implosion of the Chinese financial system - may not happen for years, or even decades, but it's inevitable. Also, isn't it odd how so many of these Chinese companies with apparently vast cash balances & huge balance sheets, don't pay dividends? Funny that!!

Also, why would a Chinese company list its shares on AIM in the UK? Perhaps because it's a virtually unregulated market, where there are no consequences for ripping off investors? That point might apply to many (or even most?!) foreign companies listed on AIM, in my opinion.

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davidallen77 11th Feb '13 8 of 13

Ramridge i got Camkids on my watchlist, looks interesting, if it pays out a divi as Paul pointed out it would interest me further. Rol came out on my watchlist a few weeks ago.

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rbf 11th Feb '13 9 of 13

Thanks for your response on AGL Paul - It is a shame that you missed the lunch since AGL certainly seems an interesting high risk high reward proposition. I currently have a small positon but am struggling to convince myself to increase this......I think you called it an intriguing company which is....But trying to make the case for AGL as an investment rather than a gamble is a difficult one for me, hence I would have liked to hear your furthe thoughts after meeting the management!!!! Maybe anothe opportunity will arise?

Cheers Richard

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Ramridge 11th Feb '13 10 of 13

In reply to davidallen77, post #8

David
Here is part of what IC had to say about Camkids float in December:
"... The company intends to pay dividends at 20 per cent of earnings, which would equate to a 5 per cent yield in 2013. ..."
This was part of the attraction when I bought a small holding. The bottom line is, do we trust the company, per Paul's remarks. If not, then cut and run, and that is what I will do shortly.

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fek47 12th Jun '13 11 of 13


.

Company: Whins Associates LLP
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fek47 12th Jun '13 12 of 13

In reply to Paul Scott, post #3

Hi Paul,

You shortlisted Motivcom (LON:MCM) on this list when you ran a screen back in February. It has cropped up on a screen that I've been honing over the past couple of weeks - just wondering if you ever formed a view on the company?

I wondered if you might perhaps have been put off by the extremely small free float....

thanks, Francis

Company: Whins Associates LLP
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Mark Midmore 16th Jun '13 13 of 13

Hi, Motivcom has just come on to my 'radar' I just wondered whether you looked at it more closely?
Mark

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About Paul Scott

Paul Scott

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Paul trained as a chartered accountant with Price Waterhouse. He then spent 8 years as FD for a clothing retail chain. "Retired" in 2002 to become an independent investor & analyst. more »



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