I'm like everyone else. I want to find the perfect stock. That absolute sweet gem of a stock that has all the attributes of great stock market winners - a good company at a reasonable price that everyone else has missed. I've studied the market hard. I've read all the books. I know what works in stock picking. But I just can't seem to find it. I keep looking. I keep screening the market for it. But it's just not there. My stock screens are empty. Dammit. Why?

Everyone else is looking for the perfect stock too. When everyone is looking for the same thing, you aren't going to find it as they've already bought it. The market is just too efficient. But within this very human behaviour lies an incredible opportunity. What if all that searching means we all miss what's right under our nose? What if there are entire portfolios of "perfect stocks" hidden in plain sight.

Join me on my short adventure quest to discover them.

The Search

Let me put together a very typical stock screen, with a few parameters that might define the "perfect" stock. By that I mean something that's inexpensively valued, good quality, with growth prospects and market beating momentum. I'm keeping this basic, and I know everyone has their own definition - but humour me for simplicity's sake:

  • When is something reasonably valued? Perhaps it would fairly priced against earnings (Price Earnings Ratio < 15) and paying dividends (Dividend Yield > 2.5%)
  • When is something good quality? Perhaps it should be profitable (Return on Capital > 12%, Operating Margins > 5%) with not too much Debt (Gearing < 50%)
  • When is something growing? Perhaps we'd look for strong earnings growth (EPS Growth > 15%)
  • When is it showing momentum? Perhaps we'd look for relative strength better than the market index over the last year (Rel Strength 1y > 0%)

That's a good list of everyday screening rules. I'd love to find a share like that in this market. So I put together a stock screen that uses these parameters:

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You can view the results of this screen at this link. Go on - click the link and come back and read more.

The title of this piece gave it away. In the UK Market there is not a single share that qualifies for those…

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