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Advanced Screening:
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In the ValuEngine.com world, screening doesn't mean sorting resumes or watching a
movie.. It's an easy to use method of choosing stocks that fit your own investment strategy.
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The first thing we need to do of course is to have a strategy, or a kind of map of
where we want to go. No one has gotten to any destination without a map since Leif
Erickson's father threw him out of Norway for insubordination about a thousand years
ago. He wound up being called Leif the Lucky for a very good reason: After setting out
across the uncharted north Atlantic in an open longboat, he was actually heard from again.
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With ValuEngine.com, you don't need to be lucky. You'll never be alone or without
guidance on the financial oceans of the world. But you need to choose a destination.
Are you after short or intermediate term profits? Or are you building wealth for a
retirement in the distant future? Or both? Give this some thought- it will influence
the time horizons you choose.
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Now, let's see how to screen the stocks you want from our database of over 7,000 companies.
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First, let's look at the screening process itself and then we'll try it out.
From the screening tab on the home page, select advanced screening.
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At the top of the page, we're asked to choose, if we wish, the territory in which we're
going to prospect. You can choose an index, a sector, and an industry. You can also choose
nothing, in which case our screening function will search the entire stock market.
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Next we see the Valuation and Momentum section. Check the undervalued and top momentum
boxes if you're looking for potential upward price movement.. Short sellers, or people
betting on downward price movement, would look for overvalued stocks with little momentum.
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The Forecast Criteria section is where you set short or intermediate term investment
goals. Try to be realistic here. For example we doubt very much that the screening
function would find anything for you if you asked for a gain of at least 100% in the
next month. You can choose time horizons of one month, one year, or just ask for
stocks that have a chance of gaining something in the next year.
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Because earnings per share or EPS can have a profound effect on share prices,
in this section you can ask for stocks with certain expected growth rates, certain
current EPS, or ones that will have EPS in a selected range a year from now.
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Risk is ever present in any investment. Risk and volatility or the frequency and
size of price swings go hand in hand. ValuEngine.com lets you manage risk, by helping
you choose stocks with high or low volatility. Check the icewater level in your veins
and enter percentages here that correspond to your level of risk tolerance.
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Quality in the ValuEngine screening function refers to a stock's Sharpe ratio.
Devised by Nobel Laureate William Sharpe, this ratio reflects the risk return tradeoff
of an investment. Investors looking for gains in value want to see a positive Sharpe ratio;
the higher the better. Again, short sellers anticipating a price decline would look for low
or negative Sharpe ratios. The same goes for the historic five year return the stock has
demonstrated. Choose the rankings here that are consistent with your own investment outlook.
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Size in stock screening means the total market capitalization of a stock. Here you can
choose size by rank or in terms of the actual dollar value of all the issue's outstanding
shares. You may also select here the range of the price per share you are willing to pay in
making your investment. Liquidity as meant here refers to the daily action or trading
volume the stock sees. High liquidity means that there will likely always be a ready an
orderly market for your shares should you wish to sell. Low liquidity would not necessarily
make your shares difficult or impossible to sell, but the price could be all over the
map on any trading day.
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Once again, you need not assign values to all of the criteria listed here. If you wish,
just pick the areas that most concern you. When you're finished with your selections,
click on the submit button, and the Advanced Screening Function will return a list of
stocks for your consideration.
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Smart Screening:
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Now let's have a look at the Smart Screening function. There's an old saying about
birds of a feather flocking together in Palm Beach in the wintertime. The same is true
of the stock market. Smart Screening will let you look for stocks that are similar in
terms of five different criteria to a stock or stocks in which you are interested.
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Note that you can run variations on the theme by selecting deviations from similar to more
or less similar. You can use this function to complement Advanced Screening after
selecting a few stocks there for your portfolio.
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Take the stocks you flush out in Smart Screening and submit them to Single Stock
Valuation to examine them more closely before making a decision. (Remember to use all
the tools in the ValuEngine.com toolbox for optimal results.)
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Next we'll have a look at the ValuEngine portfolio tools. You will be able to import
your finished list from your screen, or, if you prefer, we'll supply a sample portfolio
for you to "road test" as you learn these next important functions.
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Alan Smith is a financial journalist and businessman with over 25 years
of hands-on experience in both equity and credit markets.His articles have appeared
in several western newspapers and in online mortgage information sources.
He lives in Stamford.
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