I use stock screeners every day.
I cannot imagine investing in stocks without the assistance of a
screener.
There are over 10,000 stocks out there and you need a quick and
reliable way to sort through them all.
It's not enough to type familiar ticker symbols into a website
and do a spot check on whatever items happen to be displayed.
For one, most people's universe of familiar stocks is relatively
small. And that alone will limit one's investment opportunities.
And two, even if your universe of familiar stocks is larger than
most, nobody's is big enough to stay abreast of them all.
Nor would you want to. Many stocks should not even be considered
as investments. So you don't want to clutter your mind with those
tickers.
But many others are worthy of consideration, and you need a way
to get those onto your radar screen.
This is important. Many investors are not seeing the kinds of
returns they want in their portfolios because their universe of
familiar stocks is limited.
What's interesting is that some of your best performing stocks
right now were likely new to you at some point.
But there are plenty of others that could also be top performers
for you if you only knew about them.
And the best way to discover new, potentially profitable stocks
is to regularly scan for the best opportunities.
Wish List
Some people avoid screeners because they think it's complicated,
or they don't think they know enough about stocks to look for the
right things.
But you don't have to be an analyst to benefit from a
screener.
For example, if you're interested in finding some new stocks for
your portfolio, just ask yourself some simple questions.
Such as: Do I want stocks that will see both sales growth and
earnings growth next year?
If so, plug those into the screener.
Now, only those with your desired growth rates will appear on
your list. And those with negative sales growth or negative
earnings growth will NOT be on that list, so you don't have to
waste your time on them.
Would you prefer your stocks to have low debt levels or high
debt levels?
(If you're thinking about traits you'd like your stocks to have,
I'm assuming you said low debt levels.) And if that's the case,
plug that into your screener as well.
Now, only stocks with your desired growth rates AND low debt
will come through.
Would you want your stock to post a positive surprise or
negative surprise?
If you're bullish, you probably said positive surprise.
There's no foolproof way to perfectly predict which stocks will
positively surprise in the future. However, studies have shown that
stocks that have surprised in the past have a tendency to surprise
again in the future. So by screening for stocks that have recently
posted positive surprises, you are increasing your chances that
those stocks will positively surprise for you.
Just go down your wish list of characteristics you'd like your
stocks to have.
Your criteria do not have to be fancy, and your screens do not
have to be complex. Much of it is common sense. And the screener
will help you sift through all of the garbage so you can spend your
time on only those worth considering.
Inspiration
A good screener can also inspire you and introduce you to new
ways to pick good stocks.
In the Research Wizard (the screener that I use daily), there
are hundreds of different screening items to pick and choose from.
(I can even create my own.)
And they are all organized in easy to understand categories like
Growth, Valuations, Margins, etc.
But in addition to the most common and most popular screening
items, there are other lesser known items available, but no less
powerful.
A great example is the R-Squared Growth Rate item. I had seen
that item in the screener over and over again. One day I decided to
test it. I read the definition that came with it and decided to
give it a try.
Long story short, I was amazed at its predictability. And I
ended up creating a screen with that little known item. And I was
so glad I did. Because that screen was actually UP in the bear
market of 2008 while the market plunged nearly -40%!
They say when you play a sport with someone better than you, it
raises your game. Or when you work with a talented person, you
perform better. The same is true with the tools that you use.
By seeing what a tool is capable of, it allows you to think
about what you could be capable of.
I never would have 'discovered' the R-Squared Growth Rate item
(not to mention countless others) if those items hadn't been
staring at me and made available in a tool that allowed me to test
them.
A good stock screener can inspire you and help you pick better
stocks on a consistent basis. And as traders and investors, that's
what we all want.
Today's screen focuses on some of my current wish list
items:
- Top 50% of Zacks Ranked Industries
(The top half of Zacks Ranked Industries has outperformed the
bottom half by a factor of more than 2 to 1.)
- Zacks Rank equal to 1
(Over the last 26 years, the Zacks #1 Rank (Strong Buy) stocks have
shown an average annual return of 26% a year.)
- Positive Projected Sales and EPS Growth
(Simply put, I want my stocks to be growing on both the top and
bottom lines.)
- Positive Sales and EPS Surprises
(As mentioned earlier, stocks that have surprised in the past have
a tendency to surprise again in the future. This increases our
chances of getting into stocks that will positively surprise for
us.)
- Expanding Margins
(If margins are going up, that means management has a good grip on
costs, which allows more of each sale to be counted as
earnings.
- Price to Sales Ratio less than or equal to 1
(In my testing I have found that stocks with a Price to Sales (P/S)
ratio of less than 1, significantly outperforms stocks with a P/S
ratio higher than that. (Over 4 demonstrated the worst average
returns.)
Here are 5 stocks that made it through the screen this week:
CNO CNO Financial Group
FIX Comfort Systems
KIRK Kirklands
ORI Old Republic Int'l
SEE Sealed Air
All of these stocks meet every single one of my current wish
list items, which means you can focus your time on only the top
selections.
A good screener can help you save time, discover new stocks,
consistently find winners and inspire you to become a better
trader.
Be sure to get the rest of the stocks on this list. And make
sure you sign up for a free trial to our powerful, yet easy to use,
screening and backtesting program for your own stock picking
inspiration.
Click here to sign up for a free trial to the Research Wizard
today.
Disclosure: Officers, directors and/or employees of Zacks
Investment Research may own or have sold short securities and/or
hold long and/or short positions in options that are mentioned in
this material. An affiliated investment advisory firm may own or
have sold short securities and/or hold long and/or short positions
in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and
strategies are available at:
http://www.zacks.com/performance.
CNO FINL GRP (CNO): Free Stock Analysis Report
COMFORT SYSTEMS (FIX): Free Stock Analysis Report
KIRKLANDS INC (KIRK): Free Stock Analysis Report
OLD REP INTL (ORI): Free Stock Analysis Report
SEALED AIR CORP (SEE): Free Stock Analysis Report
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