Micro Stock Value Screen / 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

This is the second month of performing the screen. Last month's list performed poorly, returning -15.35% versus -13.2% on VBR, the small cap value ETF.

I would describe this as a high beta strategy - it performs very well in bullish markets and underperforms in bear markets. I said last month that "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'." My thoughts are the same this month.

The current top 10 stocks as of yesterday are also below:

Ticker Name Free Trend Analysis MktCap Industry
SALM Salem Communications Corp Here 99.83 Broadcasting & Cable TV
ESCA Escalade, Inc. Here 61.01 Recreational Products
SGMA SigmaTron International Here 21.02 Electronic Instr. & Controls
BXG Bluegreen Corporation Here 172.84 Hotels & Motels
HTCH Hutchinson Technology Incorpo Here 121.25 Computer Storage Devices
RCKY Rocky Brands, Inc. Here 44.9 Footwear
HAST Hastings Entertainment, Inc. Here 66.6 Retail (Specialty)
DSWL Deswell Industries, Inc. Here 69.45 Chemicals - Plastics & Rubber
FLXS Flexsteel Industries, Inc. Here 81.77 Furniture & Fixtures
WCAA WCA Waste Corporation Here 93.54 Waste Management Services

Disclosure: No Positions