Constructing Winning Stock Screens
by John Bajkowski
Over the years, we have studied the works of many famous and successful investors.
Our goal has been to learn from the winning strategies and techniques of investment legends, modern day investment professionals with a proven record of long-term success and even prominent academic research on investing. We have found that it is easy to come up with a list of meaningful screening criteria, but building and applying a cohesive set of criteria can be challenging.
In this article
- Defining a Clear Objective and Approach
- Primary Screening Criteria
- Secondary or Conditioning Screens
- Monitor Your Holdings
- All Screens Are Preliminary
- Value Screening
- Growth Screening
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Screening is the application of quantitative criteria to a broad universe of stocks in order to narrow the list down to a few companies. It allows you to focus your attention on a smaller but more promising group of stocks. It also forces you to use a consistent framework to decide which stocks to add or remove from your portfolio. Discipline is a common trait shared with the successful investors that we have studied. It is too easy to let our emotions such as greed, fear and even pride take over the decision-making process and ignore the rational side of investing.
We illustrate how these approaches can be translated into a series of practical rules or screens that our members can use to build stock portfolios. AAII’s Stock Investor Pro and the Stock Screens area of AAII.com have over 50 different approaches that you can follow. But how do you pick an approach that is right for you, and how did we construct the mix of criteria that make up each screen? This article provides an overview of the stock screening process and illustrates how to design or select a stock screen that makes practical sense.
It is best to look at screening as a multi-stage process:
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Discussion
Very good article.
I am a beginner and was looking for example for each of the screening examples with respective values.
Do you have any suggestion to get the values for the above screening criteria?
posted 2 months ago by Balakrishnan Shankar from Texas
This will guide me to create my own method and I want to follow that while managing my IRA account rather then so called professional charging me hand and mouth to bring me no extra returns and at times even worst then their benchmark.
posted 2 months ago by Mukesh Patel from Virginia
This is a great article on stock screening and the development of screens, but does not talk about where there is a screening tool with the primary and secondary criteria, as mentioned, that anyone could use.
posted 2 months ago by Dave Gilmer from Washington
