I have begun conducting the following screen on a monthly basis. Early out-of-sample results have been mixed, performing well during bullish environments and poorly during bearish/choppy markets. June's list is here, May's list is here, Aprils' list is here, March's list is here, February's list is here and January's here. The screen looks for the following:
- earnings growers still reasonably priced as judged by the PEG ratio
- low debt
- a history of high return on equity and investment, and
- price momentum as gauged by the percentage the stock is trading to its 250 day high.
When the screen results in more than 5-10 stocks I have also started tracking returns of the top 5 or 10 stocks at the beginning of each list. The top stocks are selected based on fundamental factors. For the full list of stocks and results, please see the right hand side of Scott's Investments.
The screen has tested well historically in bullish periods so strategies an investor could use to avoid drawdowns would be to either a) abandon this type of strategy entirely when the S&P 500 or another major index is below a long term moving average, or b) hedge positions with a position in SH or write a short option strategy on an equity index or ETF like SPY.
A reader recently asked why I didn't invest in many of the strategies I track. Part of the reason is that backtesting strategies which have historically performed well is different than putting money to work out-of-sample. Thus, part of the goal of my site is to track (for free) some strategies which I find intriguing so that readers can follow along to see how they perform as markets ebb and flow and when-or if-comfortable make an informed invest decision.
Two possible tools an investor could use to conduct this screen on his/her own are stockscreen123 or Finviz. This screen was conducted using stockscreen123.
Ticker Name Trend Analysis Rank MktCap Industry MDF Metropolitan Health Networks, Here 98.56 155.67 Healthcare Facilities FOSL Fossil, Inc. Here 98.48 2706.06 Jewelry & Silverware JOSB Jos. A. Bank Clothiers, Inc. Here 97.28 1113.73 Retail (Apparel) ARO Aeropostale, Inc. Here 96.98 2888.01 Retail (Apparel) TXN Texas Instruments Incorporate Here 96.38 30334.06 Semiconductors FCFS First Cash Financial Services Here 92.81 738.66 Retail (Specialty) TSM Taiwan Semiconductor Mfg. Co. Here 87.83 54185.16 Semiconductors CPLA Capella Education Company Here 83.44 1504.14 Schools CTCM CTC Media, Inc. Here 80.16 2772.92 Broadcasting & Cable TV LRCX Lam Research Corporation Here 71.31 5352.38 Semiconductors CRR CARBO Ceramics Inc. Here 68.81 1849.53 Constr. - Supplies & Fixtures
Disclosure: No positions in stocks mentioned