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Online Investing Hacks
By Bonnie Biafore
June 2004
More Info

HACK
#4
Fast and Free Stock Screening Tools
Narrowing the stock field down to a handful of attractive candidates is easy with many of the online stock screening tools
[Discuss (0) | Link to this hack]

With over 10,000 publicly held companies available as investments, you need some help whittling the field down to a few companies for further study. Many companies aren't good investments. Some don't grow enough. Some don't grow at all. Others are growing, but cost too much to offer you a sufficient investment return. Others are growing and reasonably priced, but too risky for your peace of mind. Weeding out all these companies typically narrows your candidates significantly. In addition, you can narrow the field further if you're looking for companies in specific industries or with a particular market capitalization to satisfy your portfolio diversification objectives . It doesn't do much good to identify desirable characteristics, unless there's an easy way to filter the list for stocks that possess those features. Fortunately, that's exactly what stock screening does, and free stock screening tools abound on the Web.

Stock screening tools are black and white. When you define a criterion, a company either meets it or doesn't. For example, if you screen for EPS growth rate of greater than 15 percent, a company growing at 14.9 percent won't show up. Overly rigorous screening criteria might weed out companies that you should consider. One way to correct this failing is to adjust your criteria until the screen returns eight to twelve stocks. Then, you can compare the companies' financial measures to identify the three or four you want to study in depth.

Don't try to screen all the way to the final four stocks for your in-depth study and under no circumstance screen to only one stock! Keeping your criteria more flexible enables you to catch companies that don't quite fit your criteria but are worth consideration, such as high-quality companies that are currently overpriced. Besides, companies are more than their numbers . For example, a stock screen can find companies with attractive historical earnings and sales growth, but it can't tell you which companies are positioned to continue their growth into the future.

The Best of the Bunch

Every comprehensive financial web site worth its salt offers stock screening tools, most at no charge. In fact, most of these sites provide several types of screening tools including predefined stock screens, easy-to-use screening forms on a web page, and sophisticated criteria builders that enable you to create highly customized screens . summarizes the features available for the best fast and free online screening tools.

Table 0. The best tools for screening stocks quickly

Screening feature

Quicken.com Full Screen

Morningstar Stock Screener

Yahoo! Finance Stock Screener

Industry

Market capitalization

 

Investment style

 

 

Growth rates

One-, three-, and five-years revenue, EPS, and income

One-, three-, and five- years revenue, and five-years EPS

 

P/E ratio

PEG ratio

Dividend yield

Debt ratio

   

Profit margin

 

ROE and ROA

ROE only

 

Percent institutional ownership

   

Test choices

Optional minimum and maximum values

Greater than or equal to

Small menu of choices

Quicken.com (http://www.quicken.com/investments/stocks/search/)
Morningstar Stock Screener (http://screen.morningstar.com/StockSelector.html?ssection=StockScreener)

Morningstar offers a simple, customizable screening tool as well as several built-in screens with catchy names and attractive philosophies, such as Profitable but Unloved, Blue-Blood Blue Chips, and Classic Appeal. The customizable tool offers 17 variables with numerous values on drop-down lists. Whether you use built-in screens or create your own, you can choose different views of company data, including Snapshot for variables such as the stock sector and market cap, or Company Performance for growth rates, ROE, and debt ratio. To sort the results by a financial measure, simply click the column heading. When you use a built-in screen, you can select the Set Criteria tab to create a customized screen based on the criteria for the built-in screen.

Yahoo! Finance Stock Screener (http://screener.finance.yahoo.com/newscreener.html)

TIP

The basic online stock screening tool offered by MSN Money is far too simplistic to be of any value. However, MSN Money provides dozens of built-in stock screens (http://money.msn.com/investor/finder/predefstocks.aspx), including some of the only free technical screens available online. In addition, you can download a plug-in to use their powerful customized screening tool .

Using Quicken.com's Full Search Screening Tool

Let's use the Quicken.com Full Search tool to find some large-cap growth companies that also pay attractive dividends. The stock prices for companies like this are less volatile and hold up in down markets. However, with growth companies that pay dividends, they allow you to receive total return from both price appreciation and dividend yield.

  1. Navigate to http://www.quicken.com/investments/stocks/search/full/ to open the web page for the Full Search screening tool.

    TIP

    You don't have to specify values for every criterion or for both minimum and maximums. If you don't care about a specific criterion or one end of a range, just leave the box blank.

  2. To specify that you want large-cap companies, choose at least $5B on the Market Cap drop-down list. You can also type a value such as 25,000 in the Market Cap Min box, for example if you want companies with market capitalization of at least $25 billion.

  3. To find companies that are growing at an above-average rate for their size, type 10 in the Min box for 5 yr. EPS Growth. The 5 yr. EPS Growth drop-down list includes options, such as "Above industry average" and "At least 15%." To look for companies expected to continue growing in the future, you can specify a minimum growth rate in the Earnings Growth Avg Est Next 5 Yrs criterion.

Figure 1. Sort the Quicken.com Full Search results, or change the criteria to tighten or loosen the search criteria

  1. To sort the results, select the field to sort by in the Sort drop-down list. Select Asc or Desc to sort the companies in ascending or descending order, respectively.

  2. To modify the search criteria, for example to further reduce the number of results, click the Full Search link in the left margin. Make the changes you want to the screen and click Show Results again.

    TIP

    If your screens return too many companies, you can change several criteria before resubmitting your screen. However, when the number of stocks is close to what you want, tighten up the criterion that is most important to you, such as the dividend yield if you want current income or EPS growth if you want price appreciation.


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