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Screening Strategies

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Philip Fisher Growth Screen

This is a growth screen based on the approach of the late Phil Fisher, one of the great investors of all time and the author of the classic book Common Stocks and Uncommon Profits. Fisher started his money management firm, Fisher & Co., in 1931 and over the next seven decades made tremendous amounts of money for his clients. Philip Fisher had a famous 15 point checklist for investing in stocks. Even though it includes numerous qualitative factors, it's possible to glean some key quantitative criteria too: Consistently strong profitability; Consistent sales growth; Growth exceeding industry norms; Little or no dividend payout; and Reasonable price compared to future growth prospects You can read more about Philip Fisher's approach here. more »

Growth Investing
6 Month Return: 0.2%
Bill Miller Contrarian Value Screen

This screen seeks to emulate the style of Bill Miller, manager of Legg Mason Value Trust. Miller’s strategy focuses on identifying securities that are trading below their intrinsic value, but differs from many value managers in that he focuses on cash earnings, not accounting earnings. He looks for firms that may be undervalued based on the present value of future cashflows, although this is not easy to screen for in detail. He says: "Ideally, what we want is a company... that has tremendous long-term economics and those economics are either currently obscured by macroeconomic factors, industry factors, company-specific factors, or just the immaturity of the business." Diversification is a crucial element in Miller’s strategy but he aims for diversification among the stocks it incorporates, rather than the sheer quantity. By focusing on companies that are being shunned by the market, this strategy takes on higher risks in hope of higher returns. The value moniker for his Fund is perhaps misleading because Miller has bought many Internet “growth” stocks. You can read more about Miller's approach here. more »

Value Investing
6 Month Return: 0.0%
Benjamin Graham Deep Value Checklist

Towards the end of his life, Benjamin Graham developed a flexible checklist based formula that allowed investors to build portfolios of deep value stocks large or small. It was developed with aeronautical engineer, James Rea, shortly before he died. It's become known as "Graham's Last Will" and was the result of 50 years of backtests to highlight the top ten best performing stock selection criteria. more »

Value Investing
6 Month Return: 0.0%
Tiny Titans

Tiny Titans is a small/micro-cap strategy developed by O'Shaugnessy that includes both a value component and a momentum component. He suggested it for two reasons: i) Micro-cap stocks have little or no analyst coverage so are often overlooked or ignored, and ii) Micro-cap stocks have low correlation with the S&P 500 (0.66) so they can be included in a diversified investment strategy. It looks for a market cap of $25 to $250 million (£15 - 150m assumed), combined with a price to sales below 1 and is sorted by relative strength. See here for more details. more »

Momentum Investing
6 Month Return: -0.2%
Cash Accruals Screen

This screen is loosely based on the influential work of Richard Sloan from the University of Michigan, published in 1996 documenting what is referred to as the “accrual anomaly”. A pound of earnings can be comprised of assumed non-cash earnings called “accruals.” His landmark 1996 paper revealed that shares of companies with small or negative accruals vastly outperform (+10%) those of companies with large ones His paper found that investors focus too heavily on earnings and not on cash generation. They value the earnings of a high accrual company just as highly as the same earnings of a low accrual company, even though the high accrual company’s earnings are more likely to reverse in future years. When future earnings reverse, investors are “surprised” and sell off the stock causing the stock price to decline. Similarly, when a low accrual company’s earnings accelerate in future years, they are surprised in a good way. more »

Quality Investing
6 Month Return: -0.3%
Altman Z-Score Screen

This is a short-selling strategy based on the Altman Z-score which combines five weighted business ratios to estimate the likelihood of financial distress. The idea is that, if the Altman Z-Score is close to or below 3, it is wise to do some serious due diligence. The Z-score results usually have the following "Zones" of interpretation: any Z-Score above 2.99 is considered to be a safe company. Anything below 1.80 is in the distress zone, with a strong likelihood of the company going bankrupt within the next two years, while anything between 1.80 and 2.99 is in a "grey zone". In line with Altman's result, this work is based on last annual reported results and does not factor any interim updates. According to the research, the Altman score does experience false positives (i.e. classifying the firm as bankrupt when it does not go bankrupt) in approximately 15-20% of cases. more »

Short Selling
6 Month Return: -0.7%
Piotroski High F-Score Screen

Josef Piotroski came up with a simple nine criteria scoring system to help identify bargain stocks in recovery.  It is known as the F-Score and is used extensively throughout Stockopedia on Stock Reports and in screens as a measure of an improving financial health trend.  But while his now famous original strategy (which we have modelled here) focused on applying the F-Score filter to only the cheapest stocks in the market, other analysts have discovered that the highest F-Scoring companies in the market in aggregate also outperform.   We have filtered the market in this strategy to just highlight the companies showing a Piotroski F-Score of 9. more »

Quality Investing
6 Month Return: -2.0%
Dividend Achievers Screen

This is a screen for companies that have paid increasing regular cash dividends for five or more consecutive years. It is inspired by the index run by Indxis, the Index Services unit of US player, Mergent. In addition to stipulating five or more years of increasing dividends, a stock must meet specific liquidity screening criteria. Furthermore, they must be companies with strong cash reserves, a solid balance sheet and a proven record of consistent earnings growth.  You can read more here. more »

Income Investing
6 Month Return: -2.1%
Benjamin Graham Defensive Investor Screen

A demanding intrinsic value-based screen designed for less experienced investors which focuses on “important” companies with long histories of profitable operations and strong financial condition. Graham felt defensive investors should confine their holdings to the shares of large, prominent, and conservatively financed companies with long histories of profitable operations. By this, he meant a firm of substantial size and with a leading position in its respective industry. Additionally, Graham sought companies with: 1) Strong financial position (based on the current ratio & debt to working capital). 2) 20 years of uninterrupted dividends 3) No negative earnings in the last 10 years & a 10-year annual earnings growth rate of at least 3% 4) A reasonable price-earnings ratio & a moderately low ratio of price to assets more »

Bargain Stocks
6 Month Return: -2.6%
Earnings Surprise Screen

When companies report earnings significantly higher than analyst's earnings estimates the result is known as an 'earning's suprise'.  While earnings surprises often create spikes in the share price on the day of the announcement, they have also been observed to trigger longer term increases in the share price.  This effect is known as the  "Post Earnings Announcement Drift" and can last for several weeks or even months after the announcement date.  The effect is generally attributed to the fact that analysts are slow to revise their forecasts and the market does not fully react to the information about future growth conveyed by the earnings surprises.  The idea behind the strategy is to buy stocks that report earnings surprises and hold them over this time period. Positive surprises often happen at the beginning of a turnaround, or a new growth cycle where sales start to accelerate beyond the historical rates, “surprising” the analyst community.  You can read more here. more »

Momentum Investing
6 Month Return: -2.8%
David Dreman High Dividend Screen

David Dreman champions a contrarian investment approach based on interpreting market psychology and using value measures to pick stocks that are out of favour with the market. Dreman invests in out-of-favour stocks, often in out-of-favour industries, that he identifies using relatively straightforward metric criteria. "I buy stocks when they are battered. I am strict with my discipline. I always buy stocks with low price-earnings ratios, low price-to-book value ratios and higher-than-average yield. Academic studies have shown that a strategy of buying out-of-favor stocks with low P/E, price-to-book and price-to-cash flow ratios outperforms the market pretty consistently over long periods of time."   more »

Value Investing
6 Month Return: -2.8%
Benjamin Graham NCAV Bargain Screen

This is a deep value screen based on Ben Graham's writings. It is a simplistic screen which just looks for stocks where the market cap is less than net current asset value. It is not to be confused with his more involved Enterprising Investor and Defensive Investor criteria which have been modelled separately. As a reminder, NCAV = Current Assets - Total Liabilities. That's a stringent requirement, since most companies have negative NCAVs but Graham was looking for firms trading so cheap that there was little danger of falling further. In addition, Graham would have requested a margin of safety of at least 33%, so his P/NCAV threshold would have been 0.66. Graham argued such companies were typically priced at significant discounts to the likely value that stockholders could receive in an actual sale or liquidation of the entire corporation. Because of the kind of unloved/troubled companies it generates, this is not a strategy for the faint-hearted. Graham sought safety from individual bankruptcy risk by diversifying his portfolio with a large numbers of companies – he suggested 30.   more »

Bargain Stocks
6 Month Return: -3.2%
Dividend Dogs (Forecast)

This is an income strategy made famous by Michael Higgins. It selects ten large cap stocks in a major market index with the highest dividend yield. It is a value strategy that seeks to gain from cheaply priced quality stocks that may be currently unfavoured by the market. This version uses the consensus forecast dividend yield, rather than the historic yield.   more »

Income Investing
6 Month Return: -3.2%
The Screen of Screens

This is a screen that picks the stocks that are appearing most frequently across all the other screens tracked on Stockopedia - be they value, bargain, growth, quality, income or momentum (excluding short screens). By definition, this tends to be a list of relatively defensive stocks because they exhibit good fundamentals across a wide range of investing strategies. This strategy is especially interesting as the stocks on this list will by definition be being looked at by a broad range of investors - value, growth, income, momentum, quant. more »

Quality Investing
6 Month Return: -3.2%
Dividend Dogs

A dividend screen which envisages that an investor annually selects for investment the ten large cap stocks in the major market index whose dividend is the highest fraction of their price. This version uses the historic/actual yield.   Proponents of this strategy argue that blue chip companies do not alter their dividend to reflect trading conditions and, therefore, the dividend is a measure of the average worth of the company; the stock price, in contrast, fluctuates through the business cycle.  more »

Income Investing
6 Month Return: -3.6%
William O'Neil CAN-SLIM-esque screen

This unofficial screen is inspired by the writings of William O'Neil - founder of Investors Business Daily. It uses a 7 pronged formula that finds stocks with fast earnings growth and share price momentum.  Studies by AAII in the USA have proven similar rules to be one of the most successful methods over the last decade. The so called 'CANSLIM' acronym is a registered trademark of Investors Business Daily, and the approach has become famous and well followed. The mnemonic stands for the first letter of each of the following: Current Earnings - current interim earnings strongly accelerating vs the prior year; Annual Earnings - annual earnings increases in recent years; New Highs, New Products, New Management - some kind of catalyst; Supply & Demand - small supply of shares and strong demand for the company's stock; Leaders over Laggards -  choose the best companies in each sector; Institutional Support - but avoid stocks that are over-owned; Market - only buy when the broad market is in a bull phase. more »

Growth Investing
6 Month Return: -4.1%
Richard Driehaus Screen

This screen is based on the momentum-focused approach of Richard Driehaus, a mutual fund guru who was named to Barron’s “All-Century” team of the 25 most influential and powerful mutual fund managers in 2000. It focuses on companies with momentum in earnings and prices, particularly small- to mid-cap companies with strong, sustained earnings growth that have had “significant” earnings surprises. At the core of his strategy are earnings surprises. Companies with positive earnings surprises are buys and negatives are sells. It also values surprises in which the range or standard deviation of estimates is tighter, which has a more significant impact on subsequent returns. This strategy looks for companies with positive price momentum over the last four weeks and also considers how stocks do on a relative basis versus the S&P 500. Driehaus prefer small to mid cap stocks. The investor may also wish to monitor liquidity in terms of trading volume. more »

Momentum Investing
6 Month Return: -4.5%
Piotroski F-Score Price to Earnings Value Screen

The Piotroski F-Score screen aims to identify deep bargain-bucket stocks that are in recovery.  Josef Piotroski, a finance professor, recognized that, while it has long been shown that bargain stocks have strong collective returns, there is very wide individual variability. What he wondered was whether it was possible to weed out the poor performers and identify the winners in advance. He therefore sought to develop a simple accounting-based scoring system for evaluating a stock’s financial strength. Piotroski's F-Score looks at value stocks and tests nine variables from a company’s financial statements. One point is awarded for each test that a stock passes. Piotroski regards any stocks that scored eight or nine points as being the strongest. In this version of the screen, Price to Earnings, rather than Price to Book, is used as the measure of "cheapness".  more »

Value Investing
6 Month Return: -4.8%
T Rowe Price Screen

A GARP investing approach based on identifying companies with long-term prospects in their early stages before they become "glamour" stocks. Price looked for these characteristics in growth companies: At least a 10% return on invested capital Sustained high profit margins Superior growth of earnings per share. He also looked for: Superior research to develop products and markets. A lack of cutthroat competition. A comparative immunity from government regulation. Low total labor costs, but well-paid employees. more »

Growth Investing
6 Month Return: -5.3%
Martin Zweig Growth Screen

A Growth at a Reasonable price (GARP) investing strategy that uses both fundamental analysis and market timing. It focuses on strong growth in earnings and sales, a reasonable price-earnings ratio given the company's growth rate, insider support, and relatively strong price action. Martin E. Zweig was a reputed US growth money manager back in the 1990’s as well as an investment newsletter writer. He was named stock picker of the year 2 times in a row and wrote a book titled “Winning on Wall Street”, which outlines his investing strategy. Zweig is essentially a growth investor but with a conservative streak, focusing on selecting growth stocks with certain value characteristics, through a system that uses both fundamental analysis and market timing. more »

Growth Investing
6 Month Return: -5.3%
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