Stock screening is a very important
exercise for investor to filter the market and zero in on the companies that
meet their criteria. Screening tools that widely available on the net would
allow you to quickly and easily search for shares showing high growth, yield or
daily price movement.
Stock screening tool could be used for your
technical and fundamental analysis. Personally, I prefer to use fundamental
ratios before narrow down based on the technical indicators. Financial websites
such as Financial Times or finviz.com provide
maps or heat maps indicating the favourable and unfavourable industry of the
day.
Nonetheless, the screening tool would
filter the fundamental data including:
i. company basics information such
as closing price and market capital.
ii. share performances such as price
rise or fall in a day, a week, a month or a year.
iii. growth ratios such as Earning
per Share (EPS) growth and dividend growth
iv. incomes ratios such as dividend
yield and dividend cover
v. valuation ratios such as price-to-book
ratio, price per earning, highest price per earning in a year
vi. financial strength such as net
gearing and net asset value per share
vii. management effectiveness such
as return on assets and return on capital employed
viii.Profit & Loss account such
as operating costs and revenue
ix. balance sheet such as total
current assets and net assets
x. broker or analyst recommendations
on whether sell, buy or hold
xi. director deals
The screening tool could also be set to
filter technical information such as percentage movement of price within 52
week low or high and percentage of price break above or below moving average lines.
With the comprehensive market data, the
screening and analysis are more possible to be carried online. Stock exchange
like NASDAQ has a comprehensive section for investors to use the stock
screener. In fact, it already has predefined stock
screener that could help you to find the stocks that meet your criteria.
Financial Times also has a global equity screener
that you could try out at http://markets.ft.com/screener/predefinedScreens.asp
It has more than 50 customisable screening criteria. Under FT predefined
screens, you could try screening criteria predefined by the world best
investors including Warren Buffet and Ben Graham.
Before using the screening tool, you should
have an idea on what criteria to search for. The fundamental and technical
variables make the possibilities nearly endless and you might end up betting on
the wrong stock. In the same time, it is crucial to ascertain that your
search is using the updated databases. Otherwise, your search would be meaningless. Perhaps for a start, you could adopt some predefined stock criteria.
The bottom line is the screening tool offer purely quantitative considerations.
Some ratios are not accurately filter stock from specific industry. Technology
stocks may high a slightly higher P/E because a low P/E ratio does not
necessarily mean a stock is cheap. Similarly, a high P/E ratio does not mean a
stock is expensive. Auto industry or retail industry for instance has a low P/E
but it does not mean that those retail stocks should not been considered.
