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Screening Strategies

UK Data
67 strategies sorted by
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: -6.5%
Earnings Upgrade Momentum Screen

A momentum screen based on buying stocks with rising analyst earnings estimate revisions in light of empirical findings that stocks with their estimates revised often outperform the market over at least the next 12 months. Although investing on the basis of broker recommendations alone does not appear to be a successful strategy because of the bias in those recommendations, research suggests that focusing on recent changes in broker recommendations is more fruitful, particularly in combination with other signals. You can read more here.  more »

Momentum Investing
6 Month Return: -6.6%
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
6 Month Return: -6.6%
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: -6.6%
Growth at a Reasonable Price Screen

This is a strategy that aims to highlight companies showing growth at a reasonable price.  This is a mix of value and growth investing often abbreviated as 'GARP'.   GARP investors typically target more sustainable growth rates of 10% – 20%, as opposed to an aggressive growth investor who might target 25%+ growth rates. GARP investors also tend to focus on a company having a high return on capital (especially relative to their industry average) as an indication of superior potential. You can read more here. more »

Growth Investing
6 Month Return: -6.7%
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: -6.8%
Trading below Cash Screen

This screen is loosely based on the "Cash Index" approach outlined by James Altucher in his book, "Trade Like Warren Buffett". He suggests a multi-pronged approach to analysing potential bargain/arbitrage stocks in times of market distress (post 2001 bubble / Iraq War). First of all, he suggests that it's important to recognise that these stocks are likely to be trading for less than cash for a reason, namely the mar­ket thinks they will eventually declare bankruptcy. Some of the possible risks include: i) Inaccurate reflection of "cash on hand" in their books (leases, severance packages, etc), ii) Business model destined to fail, iii) Management with no incentive to return value to shareholders. To minimise risk of buying a turkey, Altucher looks for eight factors: i) Market cap below cash, ii) Very low leverage, iii) Enough cash headroom to cover the current annual burn-rate, and iv) some stability in revenues and earnings. In addition to these easily-screenable criteria, he suggested looking out for more qualitative factors: v) A reasonable belief that the sell-off in the stock was partly irrational, vi) Favorable arbitrage analysis - , i) Insider buying and viii) Institutional ownership.  more »

Bargain Stocks
6 Month Return: -7.0%
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: -7.2%
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
6 Month Return: -7.2%
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: -7.4%
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: -7.7%
52 Week High Momentum Screen

An investing screen based on buying stocks that are close to their 52 week high (and/or selling stocks that are close to their 52 week lows). Similar to other forms of momentum investing, this seems to work because investors tend to under-react to positive (or negative) information about those kinds of stocks. Researchers surmise that investors use the 52- week high as an “anchor” against which they value stocks, thus they tend to be reluctant to buy a stock as it nears this point regardless of new positive information. As a result, investors underreact when stock prices approach the 52-week high, and consequently, contrary to most investors' expectations, stocks near their 52-week highs tend to be systematically undervalued.  Finally, when information prevails and the 52 week high is broken, the market “wakes up” and prices see excess gains.   You can read more here. more »

6 Month Return: -8.1%
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
6 Month Return: -8.7%
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
6 Month Return: -9.4%
Price Momentum Screen

A momentum screen based on buying prior winning stocks and selling short prior losers based on the empirical observation that Investments exhibit persistence in their relative performance. Buying winners inherently conflicts with the contrarian philosophy that is part and parcel of many successful investors. Nevertheless, it has long been noted by traders that good performing investments tend to continue to do so, whereas those that have performed relatively poorly tend to continue on the same path. This screen looks for high relative strength in the last six to twelve months compared with the market (top 25%) - relative strength doesn't work over short timeframes, such as one month. It excludes the most illiquid stocks, i.e. the bottom 25% of stocks based on market capitalisation. You can read more here.  more »

Momentum Investing
6 Month Return: -10.3%
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
6 Month Return: -10.8%
Greenblatt's Magic Formula

This screen implements the Magic Formula value investing strategy pioneered by hedge fund manager, Joel Greenblatt. It is based on buying 20-30 "good, cheap companies" defined as having the best available combined MFI ranking in terms of Earnings Yield and a Return on Capital.  Greenblatt argues that return on capital is the best determinant of whether a business is a good one or not (companies that can earn a high ROC over time generally have a special advantage that keeps competition from destroying it, such as a unique business model). Earnings yield is his metric for 'cheapness'. Greenblatt believes that stock prices of a firm can experience “wild” swings even as the value of the company stays relatively constant giving investors opportunities to buy low and sell high. more »

Quality Investing
6 Month Return: -10.9%
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: -11.2%
James O'Shaugnessy Cornerstone Growth

The Cornerstone Growth Screen is a growth screen which combines relative strength, earnings growth and a price-to-sales value measure, as outlined in the third edition of James O'Shaughnessy’s seminal 1996 book What Works on Wall Street. According to his book, O'Shaughnessy found that his growth strategy outperformed the market producing an annual compound return of 18% from 1954 to 1996, compared to 8.3% for the S&P 500 Index (this beat his Cornerstone Value strategy which achieved 15%, although it was more volatile). more »

Growth Investing
6 Month Return: -11.3%
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
6 Month Return: -12.1%
67 strategies sorted by