With less than overwhelming requests for information on individual stocks, here is a basic sample of what can be accomplished by using a particular screen. The following is known as the Josef Lakonishok screen and as the description implies, this is a value-momentum style screen. Thirty (30) stocks made the cut from a list of approximately 6700 companies.
In later posts I will set up my own screens, but for this first example, I wanted to show the results from one of the default screens.
Stock Screen Parameters: The following screen is looking for stocks with low Price/Book, Price/Free Cash Flow, Price/Sales or classic value screens. These are the types of companies that would be found within VTV, VOE, and VBR ETFs. The Relative Strength screens are the momentum indicators. Eliminating ADR stocks will simplify taxes if one is working in a taxable account.
Screened Results: Here are the 30 stocks that made the cut. AFLAC, PG & E and FedEx are familiar, but most stocks in this list are likely unknown to most readers.
Disclaimer: I do not hold or necessarily recommend any of these stocks for purchase. This blog illustrates what can be accomplished when using the Stock Investor Pro screening program.
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Hi Lowel,
Thanks for this new initiative. I am interested in this although I do not know if we can build something that makes sense in the end as there is a real discussion concerning using momentum on stocks vs ETF.
Just to throw in some ideas as I have not yet built a screener myself, here are my questions / thoughts on this:
– I like the concept of mixing value + momentum strategies although I have read some articles that show that a portfolio based 50% on a pure value strategy and 50% on a pure momentum strategy could make more sense as value and momentum strategies are negatively correlated.
– If we go for the mixed strategy, do we start by screening on value then apply momentum filters or the other way around?
– What are the best indicators for value? Not sure about P/E, have seen some great things about EBIT/EV or EBITDA/EV
– How do we take into account earnings quality over time and manipulation? (Piotroski score?)
– How do you take into account forward looking accounts in the screener which are most of the time using previous year data?
– What are the best momentum indicators for stocks? Do you take into account sector + market trend to not go against global sentiment?
– How do you exit the market and introduce money management?
A lot of questions but looking forward to read your views on this!
David,
I’m aware that Antonacci is cool on using momentum with stocks.
One of the best measurements for value is a low Price/(Book Value). Another is a low Price/Sales.
I don’t have much confidence I can cull out earnings manipulation. The screening program I use does have some Valuation analysis. That is about the best I can do when it comes to looking forward. Nevertheless, these are still “best guesses.”
As for exiting the market when holding stocks – I would hold the stock until it falls off the list. That could result in a lot of churning and with the cost of commissions, that definitely eats into profits.
Stock pickers rarely beat the market and that is one major reason I tend to shy away from individual stocks. You raise many good questions.
Lowell