A stock screener is a useful software program that can be used to screen stocks. The software analyzes the company's financial information and filters them according to your inputs. You can set them to filter various criteria such as price, volume, volatility, market cap, price-to-book, net profit and other factors.
Why would you want to use a stock screener in the first place?
Well, there are quite a lot companies that are publicly listed, and it would take a long time to do through research for every single one of them when deciding which companies to invest in. A screener can help you narrow your search to companies that meet your minimum requirements so that instead of having go through the entire listed stocks list, you only have a handful of companies to research and determine whether they are worth investing in or not.
What’s the caveat though?
Stock screeners are not sufficient, they are just a starting point. You can't blindly invest in stocks that you find through a stock screener. You must know what criteria to use when picking stocks and you must know how to analyze stocks if you want to be successful with investing.
Once you have a list of companies that you’re interested in, do some more research on them. To get a clearer understanding of each of the filtered stocks, you can do the following:
- Make sure to examine the company’s financial statements and their latest earnings report. If you are comfortable with reading these documents, then review them in detail.
- If not, there are plenty of websites that provide analysis on earnings reports (for example, SimplyWallstreet).
- Since they are publicly traded, they will also have investor relations sections on their website that provides information about their business model and plans for growth.
- Search for news articles related to these companies and their industry.
The most important advice is to take your time, do not rush the process of finding a company to invest in.
Let’s get practical
Below is an example of a screening I did using the Investing.com stock screener. I screened for low-cap companies with a low price-to-book and high revenue:
Note that the minimum profit I set is 0, because I’m not looking for companies that have negative profit. After inputting all the filters, we receive the list of stocks below that satisfy our requirements:
From here, you would take your research on the stocks to a more in-depth level with the steps outlined above.
You can do it
In this article, I provided the building blocks for a stock screener. To use it, you first have to define your own criteria - and no, being lazy and copying mine won't count. Then, plug those criteria into the screener. You're now left with a list of stocks that meet not just one standard, but several.
Visit: www.afrikakesho.co.za