So far we have discussed what is important in finding great stocks and how important it is to let the numbers speak for themselves. I also showed you the principles of EPS (Earnings Per Share) and EPS% increases.
However, I have not shown you how to find the actual stocks that could form your base list of stocks to review in detail.
Here is the process I use to find winning stocks.
- Understand what you are looking for. (Fundamentals – EPS% Acceleration)
- Use your selection criteria to narrow down the 7200 stocks on the US Stock Markets. (Stock Screening)
- From your Screened List, you can then review in detail further fundamentals.
- Learn a little about the industry of the stocks you are interested in.
- Analyse the Stock Pattern, to assess when to BUY “Charting”
- Work out your Entry and Exit Strategy
So, this section is explicitly about filtering out the junk to find the Gems.
This is known in the industry, as Screening for Stocks. Essentially filtering out stock based on criteria.The problem at the moment is there are many Stock Screeners on the web today but many of them want you to pay, or many of them do not allow you to select the relevant criteria. Preferring to give you options to select many indicators excluding EPS% increases.
I reviewed the following stock screeners and found them all to be lacking the relevant criteria for us to be able to find the stocks we want to see.
AOL, Google Finance, Yahoo Finance, ZACKS, Morningstar. Some offered Premium Upgrades so you pay for the screener service.
But luckily we do not need to do this. I found one that in my opinion checked all the boxes and would be really worth using. NASDAQ Stock Screener.
Although the NASDAQ exchange provides this screener, the screener can be used on all US Exchanges, which is an absolute must.
The Criteria I used to filter the stocks to potential Winner are listed here.
- Close Price >= $4 – this is the Share Price of the Stock at last market close. Use this to filter out Penny Stocks, there is a reason share price of a stock can be so small, and it is not usually a good reason, stock decline in price, because the companies behind the stock are usually run poorly, or are money little if any money.
- Market Capitalization >= $200 Million. This is the worth of all the outstanding stocks added together. Essentially the worth of the company. You could use a figure of $100 Million, of $50 Million if you wish, this depends on what you personally think constitutes a stable business size. Although the phrase coined recently is “too big to fail”, which sends shivers of paranoia through the private investor.
- EPS % Change Last Quarter >= 30% This is the % increase of the EPS for the last three months. I set this a 30%, to show us stocks performing strongly.
- EPS % Growth 1 Year >= 50%. Combined with the previous criteria, this helps us separate the men for the boys. This means over the last year the earning have increase over 50%. Never a bad thing.
- Projected EPS Change Current Quarter >= 30%. This means the companies estimated Earnings for this quarter. In the current climate you could drop this to 20% if you wish, as demand is contracting a lot, so 20% would still be healthy.
This is not an endorsement to buy these stocks this is a listing of stocks with good fundamentals, at the time of publishing.