There are many stock screeners out there for investors to simplify the process of searching the next all-star stocks. One example would be Yahoo! Finance Stock Screener, where you could set up your own parameters and the screener would find the stocks for you.
In addition, online brokerages such as Credential Direct and E*Trade provide technical analysis and stock value screeners to help investors’ with decision making.
While I was reading Dr. Thomas K. Carr’s book, Market-Neutral Trading, he mentioned different stock screening tools he used when he traded. One of the free screening tools he used is Finviz. Finviz provides company-specific data with over seventy fundamental and technical metrics. In addition, some of the parameters on Finviz are never found in any of the other free screening services. That is why I also like Finviz just like Dr. Thomas K. Carr does.
On Finviz, I used the fundamental parameters Dr. Thomas K. Carr used in one of the trading system, Pullback/Relief Rally System, to find stocks with durable competitive advantage:
- P/S (price-to-sales) < 2.0
- P/B (price to book) < 3.0
- P/FCF (price to free cash flow) < 30
- Debt / Equity (debt to equity) < 0.3
- EPS growth this year > 20%
- EPS growth next year = positive (>0%)
- EPS growth next five years = positive (0%)
- EPS growth Q/Q (this quarter vs last quarter) > 10%
- Sales growth Q/Q (this quarter vs last quarter) > 10%
I also set the price of the stock has to be below 20-Day Simple Moving Average to see if I am good to enter the market today.
I did my last screen today after the market was close. Here was how it looked:
There are three stocks that fit the criteria now. I could probably buy Ceragon Networks Limited and Fabrinet today since the former is trading on NASDAQ and the ladder is trading in the New York Stock Exchange (I have a Canadian online brokerage account that allows me to trade US stocks). In addition, their P/E ratio is below 20 (meaning both companies are not overvalued).
However, I would not buy Sierra Wireless Inc. because the P/E ratio is just too high. All the stocks in my watchlist have P/E ratios of less than 20.
In the next post we will evaluate financial statements of Ceragon Networks Limited and Fabrinet to see whether they are good stocks to hold long-term.
Feel free to leave a comment below! Catch you on the flip side!