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Screening Strategies

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67 strategies sorted by
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: -5.6%
Warren Buffett - Hagstrom Screen

Warren Buffett is the greatest living investor whose investing style was best modelled in the books by Robert Hagstrom.  Buffett's approach is a highly fundamentals-focused one blending both Graham-esque value investing principles and an emphasis on the calibre of the business franchise. In essence, it looks for simple, understandable companies that have a monopoly position and pricing power (for example, through strong brand recognition), so as to ensure consistent profits and a good return on equity, but where there is significant unrecognized value.   Our quantitative model here cannot aim to replicate the qualitative work and understanding that Buffett brings to stock selection, but aims to highlight the kinds of companies showing the longer term fundamental strength and cashflow generation that attracts him. more »

6 Month Return: -5.7%
Best Dividends Screen

This is loosely based on AAII's Dividend (High Dividend Yield) Screen. As they note, screening for relative high dividend yield is essentially all about buying low and selling high but, to succeed at this strategy, it's important also to identify which which high yielding stocks have the strength to bounce back. The screen looks for a consistent dividend payment and dividend growth track record, as well as   a payout ratio below 2/3rds, a dividend growth CAGR above 3% and a yield above the historical average.. more »

Income Investing
6 Month Return: -5.8%
Free Cash Flow Cows Screen

This screen is inspired by a similar screen devised and backtested here by the Old School Value blog for the US market. It looks for stable, cash rich companies growing their FCF, yet selling at a cheap multiple to FCF. Free cash flow is defined as cash from operations minus capital expenditure. The idea is that FCF is the ultimate driver of intrinsic value - the more FCF a company can generate and reduce debt, the higher the intrinsic value of the company becomes. more »

Bargain Stocks
6 Month Return: -5.8%
John Neff Value Screen

A hard-core contrarian value screen, albeit one using the ‘total return ratio’ in order to combine value metrics with growth. Although he didn’t like the term, Neff was essentially a contrarian investor buying good companies with moderate growth and high dividends while out of favour, and selling them once they rose to fair value. He looked for both value and growth or rather "good companies, in good industries, at low price-to-earnings prices". To identify these, his approach adds the expected future growth rate to the dividend yield, and divided by the PE ratio to give what he termed the ‘terminal relationship’ or, more colloquially, ‘what you pay for what you get’.   more »

Value Investing
6 Month Return: -5.8%
R&D Breakthroughs Screen

This screen seeks to identify research-led businesses that are investing significantly in future development in order to try to identify their potential future growth before the market does.  As Jack Hough notes, "When a company announces a breakthrough drug or a sudden advance in computer-chip technology, its shares often soar right away. Imagine being able to foresee which companies are due for such lucrative discoveries". Specifcially, the screen looks for R&D investment levels that are increasing and which equal at least 5% of annual sales and 5% of total assets. It also looks for Price to R&D ratios that are below 20x. more »

Quality Investing
6 Month Return: -6.2%
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: -6.2%
Large Cap Dividend Attraction Screen

This is a large-cap dividend focused screen, loosely based on the "Dividend Attraction" screen discussed by Kevin Matras in his useful book, "Finding Number 1 Stocks". It focuses on the added dividend security to be found amongst larger-cap stocks in a credit-constrained environment. In Matras' version, however, the primary filter is the Zacks Rank (a proprietary metric analysing analyst forecasts for i) Agreement, ii) Magnitude, iii) Upside Potential, Surprise). However, this version just uses the 3 month change in analyst forecasts instead. The other elements are: i) A market capitalisation above £1.5 bn, ii) Positive 5 Year Dividend growth, iii) Above Average Return on Equity, iv) Above Average EPS Growth and v) Price to Operating Cashflow. more »

Income Investing
6 Month Return: -6.7%
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: -6.8%
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: -6.9%
Buffettology-esque Sustainable Growth Screen

This screen seeks to replicate the approach of Warren Buffett,   arguably the most successful living investor - based on the summary/interpretation by Mary Buffett (a former daughter-in-law) in the best-selling book, "The New Buffettology".  In Chapter 13, Mary Buffett outlines a number of screening-type criteria entitled "Warren's Checklist for Potential Investments: His Ten Points of Light", which we summarise out below. Not all of these points are quantitative in nature, admittedly, but there's certainly the beginnings of a good Buffett screen, and one with a slightly different emphasis to that of the Buffett-Hagstrom screen. This version uses the Sustainable Growth method to calculate the "expected return". more »

Quality Investing
6 Month Return: -6.9%
James Montier Trinity of Risk Screen

This is a screen for short sellers (avoiding stocks on these lists is advisable). James Montier suggested this screen based on the writings of Benjamin Graham. Graham proposed three primary sources of risk to your investment in shares or any other asset - Valuation Risk, Earnings Risk and Financial Risk - each of which should be seriously considered when purchasing a new position. This screen looks for a Graham and Dodd PE of greater than 16x (valuation risk), it must have current EPS greater than twice the ten year average (business/earnings risk), and it must also have an Altman Z score of less than 1.8 (balance sheet/financial risk). more »

Short Selling
6 Month Return: -7.5%
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: -7.5%
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: -7.9%
Jim Slater ZULU Principle Screen

The Zulu Principle is an investment strategy made famous by Jim Slater in the book of the same name. It is a GARP investing style which uses a combination of growth and value, looking for shares where brokers are forecasting high earnings growth, but which are currently valued at a price that is low relative to their forecast earnings. The strategy aims to capture growth companies at a reasonable price by using the PEG Ratio. Slater uses forecast earnings to calculate both PER and the EPS Growth Rate. As Slater puts it: "I have always been attracted to growth shares, particularly those that can be purchased at what I perceive to be a discount to their proper value”.  more »

Growth Investing
6 Month Return: -8.1%
Charles Kirkpatrick Growth Screen

Kirkpatrick’s Growth Screen combines quantitative filters for relative price strength and relative reported earnings growth, and then involves point & figure chart analysis to determine whether the stock is in an upward trend. Kirkpatrick also looks for growth companies with market capitalizations of at least $1 billion and share prices of at least $10. Kirkpatrick uses point & figure charts to help in the buy and sell decision process. He only buys stocks for his Growth Model when they are in an upward trend, as indicated by two higher highs in a three-point reversal point & figure chart. You can read more here. more »

Growth Investing
6 Month Return: -8.8%
Quality Income Screen

In 2012, the team at Soc Gen introduced their so called ‘SG Quality Income Index’ - an index that aims to track stocks with strong fundamentals and good yields. Many in the market now appreciate that both higher ‘quality’ stocks and higher yielding stocks tend to outperform, but according to the research note, stocks that share both qualities put together standout total returns that have averaged 11.6% per year since 1990, more than doubling the return of the global equity markets at a significantly reduced volatility. But what is more striking is the return of the portfolio from when the market topped in 2000 to 2012 - a sideways market and a genuinely miserable time for all. While the total return of stock markets has actually been negative in that time period, the Quality Income index almost tripled. Read the full article. more »

Income Investing
6 Month Return: -8.8%
Piotroski F-Score Price to Book 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 (having a low Price to Book Value) have strong collective returns, there is very wide individual variability. “Embedded in that mix of companies, you have some that are just stellar. Their performance turns around [but] half of the firms languish; they continue to perform poorly and eventually de-list or enter bankruptcy.” 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, i.e. the bottom 20% of the market in terms of price to book value, 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. more »

Value Investing
6 Month Return: -8.9%
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: -9.5%
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: -9.5%
67 strategies sorted by