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Screening Strategies

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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
1 Year Return: 23.9%
Dreman Low Price to Book Screen

This is a low Price to Book based on the writings of David Dreman. He 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." Dreman warns that the Price to Book strategy in particular may lead to investing in loss-making stocks, at which one needs to be especially careful, and double-checking a company's financial strength is especially important. more »

Value Investing
1 Year Return: 23.7%
Richard Beddard's Nifty Thrifty Screen

A combined value screen developed by Richard Beddard, editor of leading UK finance site, Interactive Investor. It selects 30 UK-listed companies (with a market value of more than £500 million), using an approach that assesses three key criteria: i) value, as measured by the earnings yield; ii) profitability, measured by return on capital; and iii) financial strength, as measured by Piotroski’s F-Score. Essentially Piotroski plus the Magic Formula. This screen is not to be confused with the Thrifty Thirty, which is Beddard's own stock picks, as described on the Interactive Investor Blog.   more »

1 Year Return: 22.6%
John Templeton Bargain Screen

John Templeton believed that there were no simple formulae to finding good stocks, with over 100 factors that can be considered at times. However, Templeton did have four criteria which he considered particularly important: i) P/E ratio, ii) Operating profit margins, iii) Liquidating value and iv) Consistency of growth rates. Templeton also looked for any potential catalysts (new markets and products, potential M&A, as well as industry changes). more »

Value Investing
1 Year Return: 22.3%
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
1 Year Return: 22.1%
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
1 Year Return: 20.1%
Muhlenkamp's ROE Screen

This screen essentially looks for high ROEs at a reasonable price. Ronald Muhlenkamp is a renowned US investor and founder and president of the Muhlenkamp mutual fund. The Muhlenkamp fund averaged a 10.4% annual rate of return over the last 10 years to 2004 while the S&P 500 has returned 8.5%. His approach involves searching for companies with ROEs above the historic average for all companies (c. 14% for US companies since WW2) . In additions, ROEs should have remained stable over the last five years and the Company should be well-priced according to the PE Ratio. The strategy looks for companies with higher earnings growth than that of their industry peers. One should also look at profit and cost control via a factor such as the operating or net profit margin of the firm relative to its industry. The strategy also looks at financial stability, both through liabilities as a ratio to assets and the amount of free cash of the firm. You can read more about Muhlenkamp's investment philosophy here. and here more »

Quality Investing
1 Year Return: 19.7%
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
1 Year Return: 19.2%
Beneish M-Score Screen

This is a short-selling strategy based on Professor Beneish's M-Score - this is a mathematical model that uses eight financial ratios from the company's financial statements to assess the degree to which the earnings may have been manipulated. It is similar to the Altman Z-Score, but it is focused on detecting earnings manipulation rather than bankruptcy. The research suggests that a score greater than -1.78 indicates a strong likelihood of a firm being a manipulator. Here is the link to the original Detection of Earnings Manipulation paper as well as the subsequent paper - The Relation between Accruals and Earnings Manipulation. The screen below highlights companies that have had a M-score above the threshold for two years in a row in order to reduce the likelihood that a given year's result is coincidental or a rogue data input error. more »

Short Selling
1 Year Return: 18.1%
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
1 Year Return: 17.7%
James Montier 'Unholy Trinity' Screen

This is a three point short selling screen based on the approach outlined by James Montier in 2008 to identify potential candidates in weak markets.   1. High Valuation (Price to Sales Ratio > 1) - Calling the Price to Sales ratio 'insane' as a valuation measure due to its lack of focus on profitability,  Montier first screened for companies trading at a multiple of at least 4 times sales. 2. Weak Fundamentals  (F Score < 4) -  With the valuation side covered, he then qualified this list by screening for the financially weak companies having a Piotroski F Score of 3 or less.  3. Poor Capital Discipline (Asset Growth > 10%) -  But unsatisfied with only focusing on high valuation and weak fundamentals, Montier also showed that company executives were often wasteful capital allocators; research showing that companies with low asset growth rates highly outperform companies with high asset growth rates by 13% annually.  more »

Short Selling
1 Year Return: 16.0%
Charles Kirkpatrick Value Screen

Kirkpatrick’s Value Screen combines quantitative filters for relative price strength and relative reported earnings growth, with a value criterion - using relative price-to-sales percentiles, Kirkpatrick arbitrarily selected only those stocks in the 30th percentile or lower. Despite the success of his Growth Model, Kirkpatrick was concerned about the fact that its performance had occurred during one of the strongest bull markets in history. He wanted to strengthen the system against capital loss to protect against the inevitable market reversal. He believed relative price strength would not be effective during a market downturn and could lead to significant capital losses. For Kirkpatrick, the alternative was to reduce the risk of the portfolio by beginning with a group of stocks with low valuations. Kirkpatrick also looks for growth companies with market capitalizations of at least $500 million and share prices of at least $10. You can read more here. more »

Value Investing
1 Year Return: 15.3%
Peter Lynch Growth Screen

This is a 'fast growers' screen which looks for consistently profitable, relatively unknown, low-debt, reasonably priced stocks with high, but not excessive, growth. Mr. Lynch developed his investment philosophy at Fidelity, and gained his considerable fame managing Fidelity's Magellan Fund. His selection approach is strictly a bottom-up "buy what you know" one. He suggested focusing on companies familiar to the investor, applying fundamental analysis which emphasizes a thorough understanding of the company, its prospects, its competitive environment, and whether the stock can be purchased at a reasonable price.  It’s frankly impossible to come up with a screen that exactly replicates Lynch’s multi-faceted investing strategy. Nevertheless, the following approach seeks to emulate some of the key elements of his search for “fast growers”. You can read more here. more »

1 Year Return: 15.2%
Geraldine Weiss Lite Dividend Screen

A blue-chip focused screen focused on buying blue-chip stocks whose dividend yields are near the high of their historical ranges and selling when the dividend yield declines to historic lows. Geraldine Weiss was the founding editor of Investment Quality Trends - one of the longest-lived investment newsletters.  According to a 2002 Forbes article,  she has seven criteria in total (but the last criteria comprises a further six "blue-chips only" conditions). A stock: 1. Must be undervalued as measured by its dividend yield on a historical basis. 2. Must be a growth stock that has raised dividends at a compound annual rate of at least 10% over the past 12 years. 3. Is selling for two times book value or less. 4. Has a P/E ratio of 20-to-1 or below. 5. Has a dividend payout ratio in the 50% area (or less) to ensure dividend safety with room for growth. 6. Debt is 50% or less of total capitalization. 7. Meets all six of our Blue Chip Criteria: dividend raised five times in the last 12 years, carries an A rating from S&P, has at least 5 million shares outstanding, at least 80 institutional investors hold the stock, 25 uninterrupted years of dividends and earnings improvements in seven of the last 12 years. While it’s difficult to replicate this screen exactly for the UK market, we’ve produced a Geraldine Weiss-lite version along similar lines.  more »

Income Investing
1 Year Return: 14.8%
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
1 Year Return: 14.1%
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 »

Quality Investing
1 Year Return: 13.6%
Earnings Downgrade Momentum Screen

This is a strategy that aims to zero in on stocks where brokers are downgrading their earnings estimates.  In theory, this is a short-selling strategy! The idea is that brokers have a behavioural bias which anchors their new estimates too closely to their previous estimates thus making a high likelihood that earnings estimates will continue to fall in future. Continuing earnings estimate downgrades can be negative for stock prices.   However, research has shown that investing on the basis of broker recommendations does not generally work because of the bias in those recommendations. Research suggests that focusing on positive recent changes in broker recommendations may be more fruitful, particularly in combination with other signals, although this doesn't appear to be true for downgrades. You can read more here.  more »

Short Selling
1 Year Return: 12.3%
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
1 Year Return: 12.3%
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 »

1 Year Return: 11.4%
Buffettology-esque Historical 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 Historical Growth method to calculate the "expected return". more »

Quality Investing
1 Year Return: 10.8%
67 strategies sorted by