What Members Are Asking Online

Piotroski Screens

In the AAII Stock Screens area, the Passing Companies list for the Piotroski 9 approach has the note "Companies are ranked by FScore(d) and then by Price/Book(a)." I tried but could not find any definition of "FScore(d)." How can I find the definition of this term? Thanks.

—David Pressman via Web inquiry

CI Editor’s Response: Joseph Piotroski, an accounting professor, observed that most companies trade with low price-to-book ratios because they are financially distressed. He developed a nine-point scale to measure improving financial strength, hoping the best of these companies would be able to generate above-market returns.

The nine-point scale he created rewarded one point for each criterion in three categories: profitability, capital structure and operating efficiency. In his study that was published in 2000, he found that companies with a score of eight or nine outperformed those with a score of zero or one over the next year.

The F Score is simply how many points the company receives based on Piotroski’s nine criteria. The (d) means that the list is arranged in descending order by F Score. At AAII.com, you can see the screening criteria we use. A company with an F score of eight passes eight of the criteria, whereas a company with an F Score of nine passes all nine.

The overview article that accompanies the Piotroski approach at AAII.com explains his strategy and the scoring in more detail.

I note with interest that among the best stock screens you have are Piotroski 9 and Piotroski 8. Shouldn’t these be part of your [research database and screening program] Stock Investor Pro? It seems to me that all outstanding screens should be part of that package.

Could you kindly send me the code for these programs so I can program into SI Pro myself?

—Joe Tufariello via Web inquiry

CI Editor’s Response: This seems to be a question that is frequently asked. Piotroski 8 and 9 are among our best-performing screens. The Piotroski screen that comes preloaded in Stock Investor Pro is Piotroski 9.

On the AAII website, you’ll see a list of companies that show up for the Piotroski screen. This list actually includes the companies that pass both Piotroski 8 and 9. You can tell the difference by the F Score. Each company has an F Score of either 8 or 9, representing Piotroski 8 and 9, respectively.

In Stock Investor Pro, there is a simple way to change the preloaded Piotroski screen to reflect Piotroski 8. If you open the Piotroski screen in the screen editor, there is a line that allows you to change the F Score. Adjusting the F Score to 8 will give you only Piotroski 8 results.

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