Nifty Screener Criteria And Ideas

15th Feb '23 by Elio D'Amato

7 comments 889 reads

For an old stock dog like me… the thing I love most about Stockopedia is the idea generation it can create.

Remember, as a Fundamental Investor, if you want to identify stocks before everyone else, you need to find them first. Using screens is an excellent way to quickly sift through the 2000 stocks on the ASX in order to do this.

But is it possible? Despite the amount of optics on our market, it isn’t terribly efficient. Therefore it is possible to find hidden gems, and the Screener is a great way to find where the fish may be biting next.

This article will discuss some of the individual screener items and how they may be used to identify a stock worthy of consideration. Though I stress, as I would with any screening tool or set of criteria, that this is just a filter of information. Once a short list is derived, further research is required as to whether the stock is indeed an opportunity right now.

StockRanks are the obvious places to start. As I have mentioned a number of times in various forums, I am a QM (Quality/Momentum) investor so I have a number of scans available for me to use to identify such businesses.

But outside the powerful screening of Factor Ranks and the overall StockRank (which really is 90% of the value in Stockopedia) here are some little hints and criteria to help you when using the scanner.

Note: None of these ratios should be used in isolation, rather they should be combined with others. Nor is it an exhaustive list by any means, of the criteria within the Screener. But hopefully they will stimulate some thought on how you can use this powerful feature within Stockopedia to your advantage.

Quality criteria

There is a saying when it comes to analysing a company’s set of accounts, “Revenue is Vanity, Profit is Sanity…. But Cash is King!”. Any metric that allows us to delve deep into a company’s cash generating capability is always going to be powerful when attempting to find quality stocks.

One such measure is Cash Return On Invested Capital (CROIC) which is the Free Cash Flow of a company divided by the Invested Capital into a business.

The logic here is the higher the number, the…

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jabconsl

15th Feb '23

I use all that you have said plus Piotroski, Altman Z, and Beneish and I do check Share dilution. I will incorporate Total Shares Outstanding and the "One final trick (advanced users only)". However, even when a share reports as really good using Stockopedia, but then falls (Like some of the Coal shares recently TER and YAL), I suffer from analysis paralysis or straight out fear, and don't buy more :-( .

Even if the Coal Price halves the return on some of the Coal stocks is still good....but I guess the price will get slaughtered.

I'm sitting on Cash (about 22% of my portfolio) and while it's safe, it's not really productive to Income generation. If (the BIG IF) the RBA continues raising Interest rates, then it seems we may see further falls in share price. Difficult times at least for me.

Elio D'Amato

- This is not personal advice -

Glad to hear it and I like those ratios too. I actually met Professor Altman when he came to Australia some 15 years ago now and I knew his work intimately, and more importantly his motivation. His work was ground breaking in the field of credit analysis and he is to credit providers what Warren Buffett is to DIY share investors.

Just be aware the "one final trick" is particularly useful around reporting season. Come May / June it will likely not be as relevant (unless the stock remains hidden from sight).

As for buying more, the paralysis comes from the idea that we somehow need to pick tops and bottoms etc. Our focus on 'price' is what hurts us, rather if we focused on 'time period' instead the emotion element is reduced as it is hard to get particularly excited about a date (unless it's your birthday of course). Using the date as your top up / sell down reference point is far better for a fundamental investor than looking at price.

So rebalancing after reporting season is always a good option. Or the end of March, June, September and December (this ensures you catch all the ex-div dates.) The good news is that the funds to buy opportunities can come from your past winners.

And Treasurer Chalmers had a big stick out yesterday reminding banks to look after deposit holders as well (its why CBA fell as analysts think margins are as good as they will get for a while). So from a risk reward basis, a cash holding will become more attractive , so look for deals arriving soon.

And I hold a similar amount in cash assets as I hate not having the funds to seize an opportunity when I want and given my style and the stocks I get into, the higher volatility of my portfolio means that the $ return/loss on any particular day would equate to a similar sized portfolio having 100% exposure to the market but in more stable stocks.

David Mc

Thank you for this Elio, very interesting, with the Normalised earnings per share screen:

1: For the past period, what is the value? should it be less than 0? or?

2. then add Normalised EPS greater than 0?

cheers David

I also find that when I strictly apply the rules you specify above I get "no results", even removing my Piotroski, Beneish and Altman Z. I then tried by sector and still ahd no results. I think I need to interpret better.

16th Feb '23

That doesn't surprise me jabconsl. This was not a combined scan. These were individual criteria to be used in isolation at appropriate times when trying to identify a particular kind of stock

You're welcome David Mc,

And I have amended the article to make it clearer as I was a little vague on reflection. But the criteria you enter is "Normalised EPS TTM > 0" This ensures the latest reported earnings are in the black.

The trick is to the change the "Sort by" column to Normlaised EPS Prior TTM and have it as ascending. This should have the column with the negative EPS up the top.

So by inference, these negative results indicate that they are companies that are profitable today (that is the scan criteria EPS > 0), but at the same point 12 months ago they weren't (as shown by the sort by column)

Thanks again, Elio

NicholasB

2nd Mar '23

Thanks for an excellent article Elio. Helpful for me to get some insight into using the screening criteria.

Nifty screener criteria and ideas

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Elio D'Amato

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