Stock Screening Resources

Stock screening is the process of finding specific stocks that meet a given set of investment criteria. Generally, the difficulty in stock screening does not lie in the execution of a stock screen but rather in determining what specific criteria should be used to filter the thousands of publicly traded stocks.

For instance, there are many criteria you may select to create a successful stock screen. First, you might want to select a range of market capitalizations. Second, you may want to select a sector or industry to focus your list further. Lastly, you may want to further narrow down your screen by adding specific corporate characteristics that you find desirable. Some examples include growth of revenue and earnings, volatility, debt-to-equity ratios, beta and many others. With a little experimentation, you'll be able to generate a list of 10-50 stocks that may warrant further investigation.

Here are some examples to demonstrate how one can "whittle" down a list of stocks using various criteria (numbers vary depending on the screener you are using). These examples are intended to only spur creativity on your part and should not be viewed as mandatory for your particular fund.

Stock Screen Example 1: Value-oriented Total Number of Stocks 9000 Large Cap 540 Revenue Growth > 15% (5 yrs.) 120 Beta between 0 and 1 60 Price to Sales < 1 14   Stock Screen Example 2: Growth-oriented Total Number of Stocks 9000 Market Cap - All 9000 Revenue Growth > 25% (5 yrs.) 1660 EPS Growth > 10% (5 yrs.) 391 ROE > 10% 282 Beta between 1 and 2 54 PEG < 2 36   Stock Screen Example 3: Small Cap & Value Total Number of Stocks 9000 Small Cap 1400 Profit Margin > 40% 49 P/E<10 23

To give you some other ideas of criteria you can consider, here are some pre-determined screens put together by MSN Money.

Of course, you may have your own "mental screen" that you may want to apply to the list of companies that you have generated. Very few of these qualitative screens are found within any of the traditional web-based screening tools. You may require your potential investments to have well-respected management and good corporate governance. You may look to find companies that are either in favor or out of favor with Wall Street analysts. You may want to look for companies that you feel will be positively impacted by trends such as the rising interest rates, increased gas prices or the Atkins diet.

Here is a list of tools that you may find useful in your screening activities. In addition, if you already have a web-based brokerage account, you may already have a good screening tool located in your account.

 

HTML Based Screeners

Yahoo!
Yahoo's screener provides many of the basic screening criteria including company, industry, market cap, beta and several standard ratios.

Zack's
The Zack's screener is great for finding analyst estimates. This screener is also customizable and "save-able." Like the Reuters screen, there are many more variables to search by than in the Businessweek and Yahoo screeners.

Morningstar
The basic screener on the Morningstar site allows a user to search by basic criteria as well as Morningstar grades.

Backtesting.org
Backtesting is the process of analyzing a trading strategy using historical data and then seeing whether it has predictive validity on current data. Backtesting is a way of seeing if a screen or an investment strategy designed in, say 1999, would have been successful in 2000, 2001 and so on. Of course, past success is no guarantee of future performance.