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I conduct 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. Last month's list here, June's list is here, May's list is here, April's 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.
January's list returned 1.39% vs .57% for SPY. February's list returned a solid 11.78% vs. 6.77% for SPY. March returned 7.91% vs. 4.23% for SPY, April was a down month, nearly matching SPY in returning -11.57% vs -11.52% for SPY, May's list returned -6.55% vs -.56% for SPY, June's list returned -1.74% vs. 3.27% for SPY and last month's list returned a sour -10.36% vs -5.55% for SPY. One note on May's list is that due to the pullback in the market there were very few stocks that qualified for the list, four in total.

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.
This month's list contains only three stocks, which tells us the overall market is showing very few stocks trading near their 52 week highs.

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 Rank MktCap Industry
FOSL Fossil, Inc. Here 97.03 2978.91 Jewelry & Silverware
FCFS First Cash Financial Services Here 91.29 700.6 Retail (Specialty)
PCLN priceline.com Incorporated Here 76.98 14119.36 Business Services

Disclosure: No positions in stocks mentioned

Source: Top Stocks Based on PEG and Momentum