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How to Use a Stock Screener

How to Use a Stock Screener. -Robert Brown III, MII Marketing Officer Sept 23 rd , 2003. First Steps. Go to Yahoo.com or search for a stock screener Decide if you want to find a long or a short This guide will focus on a short screen Select a minimum stock price over 5.

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How to Use a Stock Screener

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  1. How to Use a Stock Screener -Robert Brown III, MII Marketing Officer Sept 23rd, 2003

  2. First Steps • Go to Yahoo.com or search for a stock screener • Decide if you want to find a long or a short • This guide will focus on a short screen • Select a minimum stock price over 5

  3. Set Parameters for a Short • Smaller market cap • Industry you understand • Analyst Recommendations (buys often = good shorts) • Search for either abnormally high earnings growth, negative earnings growth, or low earnings growth • PEGS over 1.5 might find overvalued stocks

  4. Narrow down the hunt • Sort through the screen and glance at the profile of select companies • Develop an initial opinion - Does this industry interest you? • Is this a rapidly changing industry? • Does this business make sense? • What do you want to look for?

  5. Fundamental Analysis • View the statistics on Yahoo • Ratios (ROI, ROA…) • Margins (profit, operating….) • Compare stats to competitors • What is the company positioning? • Examine stock chart • Any sudden upswings or drops in price already reflect story?

  6. Hunt down the Clues • Check out the financials quarter/annual • Any important trends? • Declining Sales (failure) • Huge Sales growth (fraud/fad) • Link the sales to net income • Does the sales story back the income story? • Ask why

  7. Following Cash • Check out the cash flow statements • Cash from operations – capital expenditures = Free Cash Flow • If the company has no free cash flow it’s financing the business through debt/equity • Good companies have positive free cash flow. Bad companies build liabilities till they collapse

  8. Specific Clues • Look at a/r and inventory • Any major increases or decreases? • Look at the quality of assets • Goodwill • Intangible • Inventory • Look at trends in debt • Over financing business • Diluting shareholder value with equity

  9. Final steps • Write down a brief thesis on why you think the company is a short • Perform an Industry Analysis • Read 10k-10q, listen to conference calls • Revise your thesis if you need too • Apply Value Added Research: call competitors, suppliers, customers, management • Does the VAR back your thesis

  10. Create a Timeline • Create a timeline with catalysts to help you decide when to short the stock. • Wait till “Chink in the Armor” because markets can remain irrational (hype the price of a bad company) longer than you can remain liquid • As romance becomes reality with the stock price you should profit

  11. Last Thoughts • Yahoo screener is very arcane. Research Insight offers more parameters • Don’t confuse screeners with quantitative models. Quant models often make the investment decision. Screeners simply narrow down the search

  12. Questions?

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