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Screening Strategies

UK Data
67 strategies sorted by
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: -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: -6.8%
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: -6.9%
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: -7.0%
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: -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: -7.4%
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: -8.2%
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
6 Month Return: -8.4%
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: -8.8%
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: -9.0%
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: -9.4%
Benjamin Graham Net Nets Screen

This strategy is one of Ben Graham's most famous bargain stock strategies aiming to find stocks trading for less than their liquidation value.  The idea is to find stocks  trading at such a cheap price that you could buy the whole company and sell off all the assets at a profit with near minimal risk.    It is a simplistic screen which just looks for stocks where the market cap is less than the so called 'Net Net Working Capital'  (defined as  Cash and short-term investments + (75% of accounts receivable) + (50% of inventory) - All Liabilities).  The formula is very conservative in estimating the value of inventory and receivables due to the likelihood that not all will be collectible in a firesale. About such stocks Graham wrote: ‘ No proprietor or majority holder would think of selling what he owned at so ridiculously low a figure…In various ways practically all these bargain issues turned out to be profitable and the average annual result proved much more remunerative than most other investments’. This is not a strategy for the faint-hearted due to the high risk companies that qualify. 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: -9.4%
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: -9.7%
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: -10.2%
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: -10.3%
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: -10.6%
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: -11.3%
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: -11.7%
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: -14.1%
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: -14.1%
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