Microstock Value Screen / Beta Strategy

by: Scott's Investments
I am a member of AAII (American Association of Individual Investors) and was recently reading one of their more popular screens, the Shadow Stock Screen. I decided to run my own test of the screen with a few small twists. This is a very simple screen that seeks out small/microcap value stocks. The screen criteria I used are below:
  • No over-the-counter stocks
  • No financial stocks
  • Market cap > $20 Million and <$200 million
  • Previous EBITDA quarter and trailing twelve months are positive
  • Share price > $4
  • Price/book < .80
  • Price/sales < 1.2
  • Top 10 stocks are selected based on highest 52 week returns
  • Screen is run every 4 weeks
I would describe this as a high beta strategy - it performs very well in bullish markets and underperforms in bear markets. Since I personally am getting a bit squeamish on how much longer we can go without at least seeing a significant pullback in this market, this is not a strategy I am investing in. However, if an investor was looking to add some risk to his or her portfolio, this one could certainly add some "juice". Below are charts of the 5, 3, and 1 year returns (click on each to enlarge) which include a .5% assumption for slippage. The current top 10 stocks as of yesterday are also below:

Current top 10 stocks on the list, based on 52 week returns:

Ticker Name Free Trend Analysis MktCap Industry
SALM Salem Communications Corp Here 128.82 Broadcasting & Cable TV
ESCA Escalade, Inc. Here 54.54 Recreational Products
SGMA SigmaTron International Here 23.32 Electronic Instr. & Controls
WCAA WCA Waste Corporation Here 101.83 Waste Management Services
RCKY Rocky Brands, Inc. Here 57.15 Footwear
BXG Bluegreen Corporation Here 163.4 Hotels & Motels
HAST Hastings Entertainment, Inc. Here 67.23 Retail (Specialty)
PNTR Pointer Telocation Limited Here 32.32 Security Systems & Services
DSWL Deswell Industries, Inc. Here 83.21 Chemicals - Plastics & Rubber
SYMS Syms Corp. Here 145.4 Retail (Apparel)

Disclosure: No positions