In Investing is it good to focus only on which is the Good Fundamental Stock Screener? Avoiding stock picking skills and earning stock picks, [T]ime consuming to search a very good stock, to get down to basic of stock picking, is it worthwhile?
Why do we resist doing things that we know are good for our investing while craving things that are detrimental to our successful investing career?
I am very often asked even after having the best Stock Fundamental Stock screener I am unable to get even close to a very good stock.
What does it mean to have a very good Fundamental Stock Screener?
Suprised! Even I was when I was answered in a very similar fashion. Which I was not prepared for. Believe you me stock screener is going to do no good until you know the right way to use it.
If stock screener was so important than robots would have very good at stock picking. Which never happens since human intervention is very important for the right stock picking.
Why Fundamental Stock Screener is As Good as You Are
In this article, we are going to bring out the most important points that one should look at selecting a good stock screener. Many value Investors use the stock screener to choose the stocks and making stock investment decisions. Every stock screener is different from another one. Each stock screener has it owns pro and cons. A good stock screener is the one which you can customize it to gather the information that you require the most. The procedure for getting in the stock screening game would be done in another post. Here we are going to focus how to get the best out the stock screener.
I am going to elaborate the points required to understand a stock screener and get the best out the stock screener. In this article, I am going to emphasis on the exact main points that are required for you to understand to get the best out of your stock screening tool.
Use this article as a go-to guide to get the most out of your Stock Screener.
The Checklist Methods
The last thing that I would want hearing your doing is replacing your checklist with a predetermined stock screener in stock screening tool or ignoring your own checklist completely.
I am a huge fan of Checklist and I can be biased towards checklist for good. At this point, I could write so many things about checklist but let’s not forget that is the not the point of focus for this post. In another post, I am going to write How to Get Maximum benefit from Checklist, Its Advantages, and Disadvantages.
I got to know about The Checklist from a book written by Atul Gawande The New York Times bestselling author of Better and Complications reveals the surprising power of the ordinary checklist in his book The Checklist Manifesto: How to Get Things Right.
Start preparing your own checklist this is the most Important aspect of Fundamental Investing. Even before you think of purchasing stock screener study and work hard towards getting your checklist right.
Stock screener’s performance would expand multifold when you have your own checklist.
Stock screener has all the historical fundamental data of a company broken down by years.
If you are looking to work with Bottom Up approach using Stock Screener you are going to hit headwinds. Since primarily a bottom-up is based on future predictions.
It is void to discuss which is more important Bottom Up or Top Down. Both are equally important and maximum benefit can be attained only if the right approach to both is done.
The ideal way and the right way is to first use a Top Down approach using a stock screener and then apply the Bottom Up approach on the results derived from the stock screener. In this way, you are first working on the stocks historical performance and next with bottom-up your working on the company’s abilities to sustain and outperform the historical performances.
Continuous Refinement of Screening
One cannot use the same screen for all situations and all purposes.
For example, if an economy has just come out of a recession that parameter would be different from when an economy is booming. At the same time, the metrics that are used for one industry would differ with the metrics that are used with another industry.
Most investors treat fundamental stock screener as a one time process without any refinements. They would find many headwinds in getting the right results and finding opportunities.
With the continuous refinement of stock screening metrics and parameter, one can definitely reach the results they are looking for. Another example for this is, if you are using the screener for a sector which is continuously making a loss over last few financial years then having a dividend as one of the parameters could give you poor results.
Focus on Measurable Traits
The most simple and important point. Never bring an unmeasurable conclusion with a measurable tool such as stock screener. This is the simple reason in the first place why we prefer top-down approach compared to a bottom-up approach. The later is not measurable since it predicts.
Unmeasurable traits should often be done with premises of the results of the stock screener. Contemplating the results in the real-life scenarios is, in other words, confirming the results of the stock screener. Scuttlebutt is another form of research which advocates getting your own hands dirty in researching a company. Ideally, the unmeasurable aspect should be done through Scuttlebutt to see the best results.
The metrics which cannot be quantified should be chosen to be covered during the field work.
Choosing only the quantifiable metrics improves the results of the stock screener. For example in R&D and Capital Intensive industry one might avoid using Return on Investment or Return on Capital.
Whether it is getting the perfect stock you are looking for or a quick confirmation of your existing portfolio these fundamental stock screener tip will get your job done. Each tool has its pros and cons, but it is almost impossible to find one that you like the most.
My favorite stock screener has been Guru Focus because of versatility it carries and it’s quick, easy and the results it gets are just amazing.
Bonus Tip: If you are using Fundamental Stock screener then the combination with Technical Stock Screener could be an added advantages in predicting the Future Stock Price.