How to Use Stock Screens
There are over 9000 publicly traded stocks.
No one can possibly know even half of these or have time to look at each one.
A stock screen is simply a filtering method to allow an investor to use software to scan all the available public stocks and find those with certain criteria.
Probably the best examples of searches are high dividend stocks, stocks that are cheap relative to earnings, growth, or book value, stocks that are up the most over a year, and stocks with no debt.
You can also search for stocks to short or avoid.
When you start sifting stocks, a good screener will show you the number of companies that meet each filter that you invoke.
Let's say you ask for stocks above $5.
00 per share, my screener tells me that I now have roughly 5000 that match this.
I then add market capitalizations above 200 million; I find that 4000 meet this filter, and when added to the first one, I now have just 2500 candidates.
In more risky markets, you don't want to own the smallest companies, as the risk of bankruptcy for these is too great.
A good screener will also allow you to only return stocks from an index, such as the S&P500, or even a sector, such as energy or financials.
Some also add relative performance criteria such as top 10% in its industry or top 20% of the entire market.
When you run screens, you need to get the number of eventual matches down to a reasonable number, say less than 100.
Your final screen will be a list of stocks you want to examine more closely, so if you don't have a lot of time to spend, 30 or less is about all you can handle on a weekend.
I like to run screens for several important criteria at once.
I don't want any low-priced, low-cap, or thinly traded stocks, meaning low daily volume; I also like to avoid companies with very much debt at all, above 10% of equity is too much for me.
Once I add these four criteria in my screen, I'm suddenly left with only about 600-750 companies out of the original database of 9500 or so, and these are usually the only stocks I would consider holding long.
From this subset of all stocks, I want to pick those best for current investment, which will involve looking at more criteria, such as recent performance, revenue growth, earnings growth, and more fundamentals factors.
When I get my final list of say, 25 stocks, I then look at stock charts, or technical analysis, to find those best suited for immediate investment or trading.
Whatever your investment strategy or bias, a screener will let you apply your own selection criteria and values to meet.
The big sites all provide screeners: Yahoo has a basic one, Reuters has an even better one.
Usually your own broker will have a good one as well, especially for active traders.
Simply find one you like and learn how to use it well, you will be screening stocks like a pro, and you may be saved from investing in the wrong companies.
No one can possibly know even half of these or have time to look at each one.
A stock screen is simply a filtering method to allow an investor to use software to scan all the available public stocks and find those with certain criteria.
Probably the best examples of searches are high dividend stocks, stocks that are cheap relative to earnings, growth, or book value, stocks that are up the most over a year, and stocks with no debt.
You can also search for stocks to short or avoid.
When you start sifting stocks, a good screener will show you the number of companies that meet each filter that you invoke.
Let's say you ask for stocks above $5.
00 per share, my screener tells me that I now have roughly 5000 that match this.
I then add market capitalizations above 200 million; I find that 4000 meet this filter, and when added to the first one, I now have just 2500 candidates.
In more risky markets, you don't want to own the smallest companies, as the risk of bankruptcy for these is too great.
A good screener will also allow you to only return stocks from an index, such as the S&P500, or even a sector, such as energy or financials.
Some also add relative performance criteria such as top 10% in its industry or top 20% of the entire market.
When you run screens, you need to get the number of eventual matches down to a reasonable number, say less than 100.
Your final screen will be a list of stocks you want to examine more closely, so if you don't have a lot of time to spend, 30 or less is about all you can handle on a weekend.
I like to run screens for several important criteria at once.
I don't want any low-priced, low-cap, or thinly traded stocks, meaning low daily volume; I also like to avoid companies with very much debt at all, above 10% of equity is too much for me.
Once I add these four criteria in my screen, I'm suddenly left with only about 600-750 companies out of the original database of 9500 or so, and these are usually the only stocks I would consider holding long.
From this subset of all stocks, I want to pick those best for current investment, which will involve looking at more criteria, such as recent performance, revenue growth, earnings growth, and more fundamentals factors.
When I get my final list of say, 25 stocks, I then look at stock charts, or technical analysis, to find those best suited for immediate investment or trading.
Whatever your investment strategy or bias, a screener will let you apply your own selection criteria and values to meet.
The big sites all provide screeners: Yahoo has a basic one, Reuters has an even better one.
Usually your own broker will have a good one as well, especially for active traders.
Simply find one you like and learn how to use it well, you will be screening stocks like a pro, and you may be saved from investing in the wrong companies.
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