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The Best Free Screens Out There
07/12/2011 7:30 am EST
It’s easy to find stock and fund advice, but it’s hard to weigh what is going to work best for you...and that’s where building some good screens is essential, writes Jim Fink of Investing Daily.
How do you select which stocks to add to your portfolio or watch list?
Knowledgeable and talented investment professionals can offer a trove of high-quality ideas. Sticking with the experts—or at least weighing their opinions—is the way to go for the bulk of your “serious” money.
But if you’re a do-it-yourselfer and enjoy scrutinizing your own investment ideas, stock screeners can be useful tools for identifying potential winners. Screens are useful for bottom-up investing, where you analyze individual companies and select a portfolio of stocks based solely on their individual business performance.
Here’s a rundown of what I consider the web’s best free stock screening tools:
Best General Stock Screener
The best general stock screener is Finviz.com. It’s got a tremendous number of data fields you can select for filtering stocks, ranging from descriptive (e.g., market cap, industry sector) and fundamental (e.g., price-to-earnings ratio, return on equity), to technical (e.g., crossing above 50-day moving average, head and shoulders pattern).
Best Mutual-Fund Screener
Morningstar’s free Fund Screener isn’t as good as the premium version, but it provides access to Morningstar’s five-star rating system, and allows users to search by expense ratios, equity style, and management tenure.
Best ETF Screener
Morningstar wins again. Once you navigate through the introductory page (I normally just click the “results” tab without imposing an initial filter), you can sort 1,286 exchange-traded funds (ETF) by a number of data fields, including expense ratio, market return, Sharpe ratio, standard deviation, dividend yield, etc.
Best Seasonality Screener
It’s hard to find a tool on the web that tells you which stocks perform best during particular months of the year. I’m aware of only two: Equityclock and AOL’s DailyFinance.
If you input enough tickers, you’re bound to find one that performs well in the upcoming month. For example, July is historically a strong month for IBM (NYSE: IBM).
Best Closed-End Fund Screener
Cefconnect.com has a screener for closed-end funds (CEF) that’s similar to Morningstar’s ETF screener. If you click on “select all” and press “submit,” you get a list of 635 CEFs. You can sort by data fields such as premium-discount and dividend distribution rate.
CEFs have been around a lot longer than ETFs, but the transparency, tax-efficiency, and lower expense ratios of ETFs appear to be attracting more investor assets these days.
Best Mechanical Investing Screeners
Sometimes it’s better to rely on proven stock screening strategies, rather than reinvent the wheel. Mechanicalinvestor.net provides you with several stock screens based on Value Line (VL) data (e.g., VL’s 1-5 “timeliness,” “safety,” and “technical” rankings) that have been back-tested for performance.
Backtest.org provides back-tested performance results for many of the screens, so you know which set of criteria has made the most money.
Although the screens are updated weekly, investors are instructed to rebalance their stock holdings only once per month. Monthly rebalancing generates high gross returns, but the trading commissions add up over time and can significantly reduce net returns.
Joel Greenblatt’s Magic Formula Investing hosts a screen that identifies stocks with the best combination of high returns on capital and low price-to-earnings multiples. This stock screen only requires annual rebalancing, making it much less expensive to implement.
It has beaten the S&P 500 96% of the time, and generates a 30% average annual return—truly magical results.
Best Dividend Screener
Dripinvesting.org isn’t a screener, technically, but the site provides a monthly list of stocks that have increased their annual dividends for at least 25 consecutive years. In these uncertain times, consistent dividend growth is reassuring.
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