Powerful But Simple Screening
Clubhouse, by Ken Kavula, Subscriber April 1st, 2014
Last month we introduced a new feature for the monthly e-newsletter, The Clubhouse. We’ll be sharing features and tips & tricks based on your feedback and favorite resources.
Last month we introduced a new feature for the monthly e-newsletter, The Clubhouse. We’ll be sharing features and tips & tricks … based on your feedback and favorite resources.
One of the advantages of being an older, more experienced investor is that I often have time to quietly contemplate the way things used to be. A few days ago I was thinking about how my 25 year old investment club used to identify stocks for consideration. It involved paper copies of Value Line and a lot of patience, going through the issues one by one, looking for stocks with revenues and earnings that seemed to be growing. After locating a few candidates, a paper and pencil Stock Selection Guide had to be completed. Only then could they be brought to the club for consideration.
Today, using one of my favorite features of Manifest Investing, I’m able to use a simple screener to quickly develop a list of stocks to study. What a difference!
Stock Screening Tool. Click on StockSearch to discover stocks to study based on a simple, but powerful set of characteristics. Results-based, seek return and/or quality among other criteria.
If you’ve never used the screener, you can get to it from the front page of Manifest Investing by clicking on StockSearch.
What Does Your Portfolio Need?
What immediately appears is a simple-to-use form. I use the screener in many ways but one of the easiest screens is to check and see which stocks have bubbled to the top in the Manifest Rankings. Each stock, as you know, is assigned a quality rating and a calculated PAR (Potential Annual Return) value. Manifest Investing combines these values and creates a Manifest Ranking for each of the stocks followed. By searching for the top one-half percent of stocks on this list, I come up with a quick list of candidates to study. They’re not all gems. Some of them are quite flawed so you don’t use the screener to find something to immediately purchase. Many on this list, however, are great ideas selling at a good price.
The accompanying graphic is what that screener looked like before I told it to find the companies:
Notice that I only filled in a single box on the screener, asking for stocks with a Manifest Investing rank of 99.5 or better.
The screening results are displayed in the accompanying table. Check out this list! Some of the names are probably familiar to you as community favorites and fit our “Up, Straight and Parallel” model of consistent growth in revenue and profits. Other names have relatively few years of history but what is there looks good. There are also a few surprises!
Screening Results (4/3/2014). These study candidates all have outsized return forecasts and relatively high quality rankings.
Southern Copper, a mining company, is not usually found on lists of high growth, high return companies. Check it out! And I’m not quite sure what Proto Labs even does; it’s another opportunity for further study.
The screener allows us to use it in many other creative ways. You can limit the screening to certain sectors or industries by choice from the lists above the criteria boxes:
If you want to choose more than one sector or industry, hold down the CTRL key as you make your choices. You can also limit your search to companies in the Sweet Spot which means they have a PAR 5-10 percentage points above MIPAR, the daily average return value.
I also like to screen using target values similar to the five simple selections in the accompanying graphic.
1. A minimum return forecast that is 5 percentage points higher than the average return forecast for the general market.
2. A quality ranking of 80 means that I’m shopping among the top 20% of all companies.
3. A financial strength rating of 80 is comparable to an “A” at Value Line. We’ll be dealing with strong balance sheets.
4. A minimum sales growth forecast of 11% means that we’ll be shopping among the smaller (in general) and faster-growing companies. Note: Many practitioners target 11% as the average sales growth forecast target for their overall portfolios.
5. A minimum EPS Stability of 80 means that we’ll be dealing with consistent companies who have historically delivered and are expected to deliver steady profitability.
The accompanying “list” presents the results of this screen run fairly recently.
That’s right! Only a single company met all of these strict criteria. This one would definitely be on my short list to study.
I promise I’ll be back soon with a continuation of this topic. In the meantime, play with the screener. It absolutely, positively cannot be broken and it might set you on a path to purchasing some wonderful stocks for your portfolio.
Ken Kavula
Ken Kavula is a retired educator and successful long-term investor. Ken has served in a number of leadership positions for the National Association of Investors and is active in four investment clubs. Welcome to the Clubhouse. Subscribers are invited to share their favorite experiences, suggest best practices and most importantly, let us know “What’s on your mind?” What topics and questions do you have? We all get better when we do this together. Email Ken at kkavula1@comcast.net.