I wrote about some of the great stock screening tools in previous posts, but those free tools seem to get better all the time.  If you are looking for some great screening tools, start off with the following:


In today’s volatile environment, I look for medium sized companies with solid earnings and a decent dividend.  Here is the criteria I used just today, as shown from the google finance stock screener. The criteria I use in today’s market is going to be very similar to the above.  For a medium sized company, I’ll search for market caps between 1 and 50 billion.  I don’t like to buy companies that are losing money, so I search for positive price to earnings ratios between 5 and 15.  Dividends are king so I make sure to look for ones that are paying something back to me as an investor, and a dividend yield between 3% and 5% should do the trick.  And to top it off, I like to screen for the 52 week price change.  I like beaten down stocks, but not ones such as financial institutions that have lost 90% of their value and losing money hand over fist.  I set the threshold at negative 40% on the low side.  And on the high side, I prefer to stay away from bubble territory, so a positive 20% is good enough on the high side for 52 week change. For diversification, you can also limit the results for a particular sector or exchange.  It’s best to take a look at your own portfolio distribution.  If you are currently heavy in energy, you can limit the google screen to healthcare, conglomerates or another sector that balances your portfolio out a little more. The screen above returned 65 matches that you can do additional research on to find something to buy.  Some of the additional things I like to do are the following:

  • Screen out anything based on personal biases or current portfolio weightings – If you only want American companies, you can rule out Honda Motors.  If you are fearful of anything related to the auto industry, you can rule out Genuine Parts.  You can also eliminate ETF’s which sometimes come up in the results.  The particular results above returned several iShares ETF’s.
  • Limit the search to specific sectors as a tool to diversify your own portfolio – Use the drop down sector box to pick a specific industry you feel you need to buy in order to balance out your own portfolio.
  • Take a look at the google finance Income Statement (example income statement here).  I personally look at the Net Income in the middle of the page and the Diluted Normalized EPS.  I like to see positive and somewhat stable numbers for the last 5 quarters.  Currently, google only has quarterly data available going back 5 quarters, but you can also look at the yearly data to go back a few years without the quarterly breakdowns.
  • Take a look at the google finance Balance Sheet (example balance sheet here).  I personally like cash rich companies so I look at the Cash and Equivalents at the top of the page.  This is especially important in today’s very tight credit markets.  I also look at the Total Debt numbers in the middle of the page.  Is it a manageable number as compared to their existing Free Cash Flow?  Is their total debt increasing, decreasing, or stable?
  • Take a look at the google finance Cash FLow Statement (example cash flow statement here).  I look to the Net Change in Cash near the bottom of the statement.  I like to see positive numbers for all viewable quarters and annual periods available.  I won’t necessarily rule out a company with an occasional negative cash flow, but I may have to dig deeper to justify the negative cash flow.  I also like to compare the annual positive cash flow in relation to the long term debt.  A good rule of thumb is the number 3.  If a company is capable of paying off their entire long term debt with 3 years of positive cash flow, then their debt levels are manageable.  Note, I’m not implying that a company needs to pay off their long term debt, only that they are capable of doing so.
  • Optional - If you have any faith in efficient market theory, you can stop here and pick one of the results that matched your additional and manual screens.  The other approach is to analyze yourself into a corner by digging deeper into the quarterly and annual reports, listening to the conference calls, and reading research reports, and blog and message board reviews.  But it’s virtually guaranteed you will stumble into something you don’t like – pending lawsuits, consistent “one time” charges, underfunded pension liabilities, higher input costs, labor disputes and more.


The next question – to hedge or not to hedge? Once you find something you are willing to throw your money at, the next question to ask yourself is whether you want to hedge your bets.  The idea of hedging is that no matter how much research you do, you can still be wrong, and still lose money.  Hedging offers you a way to limit your downside risk in exchange for capping some of your upside risk.  Here are some other articles that discuss hedging, and a book recommendation on PUT Options (one of the most common hedging techniques).

Note:  While it’s great to have the free information in the articles at Geldpress, sometimes it really does help to buy a good book to get the entire picture.

Put Options : How to Use This Powerful Financial Tool for Profit & Protection
Put Options : How to Use This Powerful Financial Tool for Profit & Protection by Jeffrey M. Cohen