Might stock screening prove the key to your investment success?
(Photo from Chema Madoz
I read Jack Hough’s new book Your Next Great Stockon the plane ride back from Chicago. I enjoyed the book, and he did a good job of presenting a very basic introduction to stock screening. He reviews the screeners on the market as well as some of the academic evidence supporting factor based research. Jack didn’t present much in the way of backested results or sample portfolios, which is unfortunate. (I prefer factor based stock models that score all stocks on a scale of 0-100 based on composite factor rankings – like Portfolio123 – rather than screens that simply update at fixed time intervals – like AAII or ValueLine.) Most institutional pm’s use Factset, ModelStation, or something similar and expensive.
A nice free screener is James Gritton’s backtest.org. It uses the historical ValueLine database (~2000 stocks with mkt caps over $400 million) back to the late 1980s. You can put together all sorts of screens, combinations of screens, etc. (For more information check out the Mechanical Investing board at the Motley Fool.)
Here is a simple screen of screens with impressive historical results of 30% annual gains with S&P like vol. (The logic for the screens is at the bottom of the post). There is even a free software app that can find the current picks for you called Saucer.
What are the current picks for this SOS?
NLY – Annaly Capital Management, Inc.
PAAS – Pan American Silver Corp.
FRO – Frontline Ltd.
RIG – Transocean Inc.
HOC – Holly Corp.
SPH – Suburban Propane Partners LP
NE – Noble Corp.
Y – Alleghany Corp.
PRXL – Parexel International Corp.
TRH – Transatlantic Holdings Inc.
Takes the top 10 holdings from each screen, then the top 10 aggregate holdings. $100k sample port, reblances monthly with $20 commissions and .25% slippage.
Top 35 stocks sorted by % Current Yield / Current P/E Ratio
Top 10 stocks sorted by 1-year total return
Stock Price within 5% of 52-Week High
Projected EPS Growth Rate >0
Total Return 1-Year > 25%
Top 10 Proj EPS Growth Rate/Current P/E Ratio
VL Timeliness Rank <= 4
Long Term Debt = 0
Top 10% sorted by current P/E ratio
Top 10 by 1-year total return