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Computerized Investing > September/October 2003

The IBD Stable 70 Screen

| | | COMMENTS (15) | A A   Reset

by Wayne A. Thorp

Many of our readers are familiar with William O’Neil’s CAN SLIM growth approach for selecting and managing a portfolio of stocks. O’Neil founded Investor’s Business Daily (IBD), a financial newspaper that represents stock and market information consistent with the CAN SLIM system. Two years ago, IBD started an annual feature called the Stable 70 list, which consists of companies with strong, long-term earnings growth. When putting together the criteria for the Stable 70 list, the editors at IBD tried to isolate the characteristics of those companies that had weathered the recent economic and stock market downturn, much as William O’Neil tried to identify the characteristics of companies prior to their big stock run-up when developing the CAN SLIM approach. In essence, this time they were trying to put together a screen that would yield “recession-proof” companies.

This article will discuss how to apply the IBD Stable 70 screen using AAII’s Stock Investor Pro fundamental stock screening and database program, which covers a universe of approximately 8,000 NYSE, Amex, and Nasdaq National Market, Nasdaq Small Cap, and over-the-counter bulletin board or pink sheet stocks.

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Geoff Stuart from PA posted over 6 years ago:

Why did I waste my time reading through this and then discover it's an eight-year-old article? Wayne, how difficult would it have been to update the statistics before publishing this? I'm disappointed that AAII is resoorting to doing "reruns" without bringing the article up to date with more relevant performance data.

Erich from PA posted over 6 years ago:

I agree with the above comment. How well does the selection process hold up over time. How well would it have performed?

Wayne from IL posted over 6 years ago:

Luckily we update the passing company lists and the performance statistics each month for this and every stock screen AAII tracks. Here is the latest info for the IBD Stable 70 screen: http://www.aaii.com/stock-screens/screendata/IBD

Roger from FL posted over 6 years ago:

Geoffrey & Erich,
There's more here than meets the eye.
In actuality, the AAII restrictions for CANSLIM and CANSLIM revised do not represent the current IBD criteria for stock "selection". E.g., they use "float" as a restriction, and thus get only two passing stocks. If this restriction is removed one gets (in April) 12 passing stocks for CANSLIM and 8 for CANSLIM-Rev.
I subscribe to IBD and use Investor's.com I can assure you that nowhere in the paper, or on their website, can I find float used as a stock-picking criterion. I have even written to AAII President Bajkowski (April 28, 2011) and have not heard one word of reply from AAII. I don't know what "game" AAII is playing!
Roger Grossel
Lakewood Ranch, FL

Wayne from IL posted over 6 years ago:

We state that the CAN SLIM screen matches the criteria outlined in the 2nd edition of O'Neil's book while the revised screen refers to the criteria outlined in the 3rd edition. In the 2nd edition, O'Neil discusses float but never gives an exact number. He dropped that in the 3rd edition, probably because so few companies were passing. The float number we use is the original CAN SLIM screen is from an outgrowth of O'Neil's research done by Marc Reinganum.

Roger from FL posted over 6 years ago:

So if "Adam Smith" had a stock selection criteria, would you still use it unmodified?
So is Marc Reinganum the expert on IBD/CANSLIM? Does IBD agree?
Find out for yourself -& AAII- there is NO float restriction for any IBD stock selection criterion.
Is there an AAII stock screen for IBD/Oneil's current stock selection criteria - so that it is factually representative?
So if a mermber -life member at that- wrote to Pres. Bajkowski, should he expect a reply?

Wayne from IL posted over 6 years ago:

Seeing that IBD constantly quotes AAII's backtesting results, I believe they are comfortable with our methodology. Our screens are factually representative, seeing that they reflect the criteria outlined in different versions of O'Neil's book. Again, float was discussed in the 2nd edition of O'Neil's book. That is why we use it. The revised CAN SLIM screen reflects the 3rd edition of O'Neil's book, and does not have any float requirements. The fourth edition, as far as I can tell, does not make any changes from the third edition.

Roger from FL posted over 6 years ago:

I repeat the objections of Geoffrey, Erich & Roger of 3 months ago.
This article is in the Oct 8, 2011 Computerized Investing email, and it is from 2003. The passing stocks are totally different from the AAII Aug 31, 2011 screen.

Why does AAII insist on presenting us with garbage?

Update your IBD/O'Neil screens, or drop them!

Wayne from IL posted over 6 years ago:

The concept of the article has not changed, which is why we are presenting it. The passing company lists of this and all screens we track are updated each month at the Stock Screens area of AAII.com. You can go there is see the latest passing companies.

Gerald from CT posted over 6 years ago:

There is another problem with this screen: it does not find stable companies, the name is a lie. For example, the stock price of CHS (Chico's FAS, second on the list of passing companies) suffered 12-fold changes over the last five years. In the real world, strong growth means high risk if anything goes wrong.

Charles from WI posted over 6 years ago:

No screen is a magic bullet, just as no is always right.

Thorp is a CFA and has studied his whole career. The point of a screen is that it is timeless, just as Ben Graham's work is timeless. Individual investors have to do their own work and make their own decisions.

Otherwise buy a loaded proprietary fund from a wirehouse, pay them to hold your hand, and accept mediocre results

Frank from CT posted over 6 years ago:

Templeton Global Bond Fund TPINX delivered 11.5% CAGR. Just buy and hold. Makes me wonder if the monthly rebalancing is worth it.

F from CT posted over 6 years ago:

That 11.5% was over the past 10 years.

Mike from OH posted over 4 years ago:

It seems like the "IBD Stable 70" screen missed its goal. For something that is advertised to be "recession-proof", I'm surprised that it dropped over 50% from Sept '07 to March '09.

Wayne Thorp from IL posted over 4 years ago:

Any long-only strategy that was fully invested during 2007-2009 lost money. No amount of diversification was going to help since correlations turn strongly positive during such strong market downturns.

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