I am interested in using a variety of stock screens as an entry point into choosing stocks for a concentrated portfolio.It seems there are any number of screens one can run in order to dig up potential investments, which can end up overwhelming you in terms of choice. So I guess you first need to concentrate on a handful of screens and then wade through them for decent ideas. A few I am looking at are:
1. Magic Formula Investing at http://www.magicformulainvesting.com/, this is the website for Joel Greenblatt's great book "The Little Book That Beats the Market" (http://www.amazon.com/Little-Book-That-Beats-Market/dp/0471733067).The screen turns up stocks based on high earnings yields and high ROICs, you can choose what market cap you are after.While a portfolio of 20-30 stks chosen from this should in aggregate beat most benchmarks, obviously not all of the stocks will be winners... I'm interested in using the screen as a starting point to discover potential gems. One useful blog to see what stocks have been added to the site is http://magicformulainvestor.blogspot.com/ which posts a list of the latest additions to the site on a weekly basis.
Some of the names crop up on the Motley Fool's Inside Value newsletter as well as at Value Investor's Club website.
2. The American Association For Individual Investors at http://www.aaii.com/ has a whole load of interesting screens on its site (subscription only but at US$290 for lifetime membership it is a bargain). I'm most interested in some of the value screens... Perhaps they could be used in conjunction with the MFI screen above to get good results? I've read elsewhere that some people are combining the Piotrsoki screen (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=249455) with the MFI names to help select stocks...Does anyone have an opinion on this?I've come across this fool post http://www.fool.com/community/pod/2006/060727.htm. Some of the other AAII screens look very solid, such as the John Neff or P/FCF screen, as starting points.
3. In his book "Mosaic" Mohnish Pabrai (http://www.amazon.com/Mosaic-Perspectives-on-Investing/dp/0974797413) talks about a number of screens he uses such as stocks trading below one a price to sales basis....He argues that sales (i.e. revenue) tends to be the least tampered line on an income statement so is fairly trustworthy...You can get a P/S ratio screen on Yahoo... I haven't really looked at this as a starting point yet. Does anyone out there use P/S ratio as their jumping off point for promising investments?
4. There is also the 52-week low list, which many people look at but needs to be used with some care as stocks there tend to be at their lows for a reason, it's picking up the bargains here that is the key. Stockpickr has an edited 52-wk low highlight list it publishes here... http://www.stockpickr.com/today/52-Week-Lows/. The full monty of 52-wk lows is available on morningstar at http://quote.morningstar.com/highlow.html. Again back to Mohnish Pabrai, he recommends focusing on stocks one knows rather than all the small cap names and unknown dross that may be settling at these levels.
5. Finally, The Graham Investor has a number of interesting screens such as large/mid-caps trading at or below Net Current Asset Value. The NCAV one can be found here http://www.grahaminvestor.com/screens/grahamsv_result
Also this blog is a good source for stks below NCAV (as the name somewhat suggests)
I think NCAV could be a very promising lead too, take a look at this link from the above blog...
Does anyone have any experience with these screens as leads or thoughts on the matter. Would love to hear your thoughts.