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What's the best way for to
find investment ideas?
This article is a guest post by Zack
Miller (who writes the New Rules of Investing blog) that helps you do
exactly that.
It is about stock screeners which, for those perhaps not
familiar with the term, are programs or web pages that lets you search
for companies whose stock prices fit certain criteria.
For example, a price to
earnings ratio of less than 10 and debt to equity of less than 35%. The
screener will then give you a list of companies that fit within the
search criteria you specified.
Screeners are really helpful tools but they are just that, tools. They
also make mistakes, which means they are just a starting point in your
search for good investment ideas.
I use screeners extensively to find investment ideas. But as mentioned
it is just a start, from there I do an in depth analysis of the companies
identified in the screen.
The screeners Zack mentions are really useful for the do-it-yourself
investor and are great resources for finding investment ideas to
research further.
The Web’s Best Stock
Screens: Looking for the next winning
investment
Stock screens allow
investors to sort through lots of
different stocks in search for only the ones that fit certain
criteria. Investors looking for the next stock pick for their
portfolios can use basic screening tools, available at both Yahoo!
Finance and Google
Finance.
MSN
recently
retired its highly-regarded stock screening tools,
leaving what’s freely available somewhat lacking.
Screening
2.0, something I
like to discuss on the site, provides the same outcomes but
incorporates more algorithmic know-how, some artificial intelligence
(how do you deal with an infinite P/E one year?), better ability to
backtest results, and preset criteria to match results of the world’s
best investors.
I decided to piece together a list of
some of the
Internet’s best free and premium stock screening resources.
So, here goes:
General Investing
-
Validea:
One of my favorites and started by author of The Guru Investor, John
Reese. Validea is a premium service that tracks screens
preconfigured with the investing criteria of history’s greatest
investors, like Buffett, Graham, Peter Lynch, Ken Fisher, and more.
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Finviz:
Lots of stuff going on here. IMO, the most powerful, free screener
available. With fewer preset screens, Finviz is for more advanced
investors who have specific criteria they look for in stocks. A
whole lotta descriptive, fundamental, and technical ways to sort for
new ideas.
-
Manual
of Ideas: Mentioned in my post from last week, Top
6
Ideas for Piggyback Investing, MOI has both free and premium
screens like 10×45 Bargain Hunter, European Value Report, Equities
and Tobin’s Q. These screens come in form of subscription
newsletters (again, some free, some premium) with more analysis
included beyond the output of the stock screens.
-
AAII
Screens: Blown away by how many screens the American Association
of Individual Investors has on its website (you have to join AAII to
access these screens). You can find growth and value screens with
preset parameters (like IBD Stable 70 and CAN SLIM) as well as guru
screens that look for specific investment criteria established by
famed investors like Graham, Buffett, Dreman, Lynch, Zweig, etc.
Value Investing
Institutional Ownership
-
AlphaClone:
Of
course, this hedge fund slicer-and-dicer is a stock screen of sorts.
This premium product (read my review here)
allows users to identify the top performing funds, peer into their
holdings and backtest their strategies.
Insider Buying/ Selling
Technicals
-
StockFetcher:
Nice
premium screen for technical investors encompassing Bollingers,
Candlesticks, Moving Averages, and more. Output is downloadable to
Excel.
As mentioned in this article Most
underrated investor resource on the internet,
I really like the Financial Times stock screener as it has more
international coverage and is also really easy to use. And best of all
its available for free you just have to register (also free) on the
Financial Times website.
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Prosperous investing
Tim du Toit
PS
Screeners are great tools you can use to find investment ideas.
However, should you not have the time to screen and research
investment ideas, take a look at my subscription service.
All the research is done for you all you have to do is read, decide and
follow the clear buy or sell instructions.
Get
more information here
P. S. You simply have to invest when you find a good company in the software industry.
Here’s why.
A software company, once its development and fixed costs are covered, generates just about pure profit on each additional sale as the cost to produce an additional CD is virtually zero.
This month I stumbled onto exactly such a company when searching for an investment to recommend to my subscribers.
The company is trading at a price to earnings ratio of under 12. I agree this does not seem like a bargain but remember 2009 was a difficult year for all companies.
The company is even cheaper based on its price to free cash flow (operating cash flow minus capital investment) of 8.7 times. This means the theoretical dividend the company can pay with the cash it generates is nearly 11.5%.
The only valuation measure (I look at 7) the company is not cheap on is its dividend yield of only 2.1%. This is due to it using cash to pay down debt taken on to pay for an acquisition.
But as the debt is nearly all repaid there is a lot of room for a substantial increase.
To find out how you can also get ideas like this monthly click here.
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