Popular Stock Screen Undergoes ChangeDownload printable PDF
by Wayne Thorp
For the January 2011 release of Stock Investor Pro, we made a modification to one of the more popular predefined screens. The *Piotroski, Joseph screen has been renamed *Piotroski: High F-Score screen (Figure 1) and the underlying criteria has been modified.
To more accurately reflect Piotroski’s research, we now require that passing companies have an F-Score of 8 or greater. Previously, companies needed to have a perfect F-Score of 9 in order to pass the screen. In recent years, this has led to few companies passing the screen from month to month, and sometimes no companies passing for the month.
The change allows a more meaningful number of companies to pass the screen, while better reflecting Piotroski’s research. Going forward, we will only track the results of the Piotroski: High F-Score screen at the Stock Screens area of AAII.com.
Arguably the most difficult task for new users of Stock Investor Pro is setting up a custom stock screen with their own filters. The following provides an in-depth discussion on creating custom stock screens using the Screen Editor and the features and functionality you have at your disposal.
Using the Screen Editor to Create Custom Screens
Screen Editor Overview
Users create new stock screens or edit existing screens using the Screen Editor. To get to the Screen Editor, select Tools from the main menu and then select Screen Editor (Tools – Screen Editor). You can also select the Screen Editor icon (funnel) from the toolbar or use the Alt and S keys (Alt + S). Following any of these methods will launch the Screen Editor window. At the top of the Screen Editor window, next to Name, is the dropdown menu where you will find the preinstalled screens (those screens marked with a “*”) as well as those that you have created yourself and saved. Selecting a screen from this menu will load the underlying criteria for that screen into the Screen Editor so that you can either modify the criteria or apply the screen. If a screen has already been applied to the active set of companies in Stock Investor Pro when you open the Screen Editor, its name will appear in the dropdown menu and its criteria will be visible in the Screen Editor.
To the right of the screen dropdown menu is the New button. Clicking on this button will clear the criteria from the Screen Editor. If you have created a new screen or have been editing an existing screen, you will be prompted as to whether you want to save the screen before it is cleared away. The Description window displays a brief summary of a saved screen if one was entered at the time it was saved.
Below the description window is the actual “editor,” which looks like the cells of a spreadsheet and consists of eight columns. This is where you enter the comparison statements that make up a screen. Lastly, below the screening area are 13 buttons: Insert, Duplicate, Move Up, Move Down, Delete, Save, Delete All, Save As, Print, Make View; How Many; Apply; and Close.
The Insert button is used when you wish to insert a new criterion line between two lines within the Screen Editor. To insert a line, click in the criterion line where you want to insert a new line and press Insert.
The Duplicate feature allows you to make a copy of a criterion line that already exists in the screen. This is useful if you wish to create a series of statements where only a portion is altered. Click on the criterion line you wish to duplicate and click on the Duplicate button. The new line will appear as the last line of the screen.
The Move Up function allows you to move a selected criterion line up one line at a time. Click on the line of criterion you wish to move up and click on the Move Up button until the criterion line is in the desired location. Conversely, the Move Down feature allows you to move a selected criterion line within a screen down one line at a time. Again, click within the line you wish to move down and click on the Move Down button until it is where you want it.
If you wish to delete a single criterion line from a screen, click on the line you wish to delete and then click on the Delete button. Clicking on the Delete All button will delete all of the criteria in the screen you are working on.
After creating or modifying a screen, you have two options for saving it—Save or Save As. Clicking on the Save As button allows you to name the screen you are working on and, if you wish, provide a brief description of it. The Save function will save the screen you are working on under its current name, if it is an existing screen (has already been saved). Otherwise, you will be prompted to name the screen before saving it.
The Print button allows you to print out all the criteria of the current screen.
The Make View button is a relatively new addition. Once you have created your screen or loaded an existing screen into the Screen Editor, click on this button to create the view. Once you click on the Make View button in the Screen Editor, the View Editor will open. All of the data fields that are being used in the Screen Editor are automatically added to the view, along with company name and ticker. For more information on this feature, refer to the August 2010 issue of Stock Investor News, which is available at the Stock Investor area of AAII.com.
The next two buttons create some confusion among Stock Investor users—How Many and Apply. Clicking the How Many button will tell you how many companies from the active set (the entire portfolio or the contents of a loaded portfolio) pass the current screen. However, using the How Many button does not load the results of the screen into the Stock Notebook. To actually view the passing companies in the Stock Notebook, you must click on the Apply button.
Lastly, the Close button will close the Screen Editor. If you are working on a screen that has not been saved, or if you have edited an existing screen, you will be prompted as to whether you wish to save the screen.
Creating a Stock Screen
Let’s walk through the creation of a simple screen that makes use of some of the unique features of Stock Investor Pro. The screen will filter for the following criteria:
- Company does not trade over the counter;
- Annualized growth rate in earnings per share from continuing operations over the last five fiscal years is at least 10%;
- Price-earnings (PE) ratio is less than or equal to half the median price-earnings ratio for the company’s respective industry;
- The stock’s relative price strength over the last 26 weeks ranks in the top 25% of the entire stock universe; and
- The most recent quarterly earnings announcement exceeded analyst estimates by at least 5%.
To begin, open the Screen Editor by following any of the steps outlined earlier. If you are already in the Screen Editor, click on the New button at the top of the editor window to reset the editor. You are now ready to enter the first criterion line.
In the Screen Editor, click on the first open celllocated in the Field column. This will bring up a list of the data categories found within Stock Investor Pro. Locate the Company Information category and click on the + sign next to Company Information—this will expand the category to show all the data elements within it. Scroll down the list until you find Exchange (the fields are in alphabetical order) and double-click on it. Next, click in the first cell of the Operator column and double-click on Not Equal. Finally, click in the first cell of the Compare To (field, value, industry) column (make sure it is the Compare To column and not the Factor column, which we will discuss later) and double-click on Over the counter. The first criterion line of our screen is now complete.
To begin the second criterion line, click in the second cell in the Field column. Scroll down the list of data categories until you come to Growth Rates. Click on the + next to Growth Rates, scroll down to EPS Cont-Growth 5yr, and double-click on it. Now, click in the second cell in the Operator column and double click on >= (the greater than or equal to sign). To complete this criterion line, click in the second cell of the Compare To (field, value, industry) column (again, be sure to skip the Factor column). Click on the cell again so that you see a blinking cursor and type in the number 10. Since the program recognizes growth rates as percentages, you do not need to enter the % sign (in fact, entering % in this cell will render the screen invalid).
For the third criterion line, click in the third cell in the Field column. Scroll down the list of data categories until you come to Multiples. Click on the + next to Multiples, scroll down to PE, and double-click on it. Now, click in the third cell in the Operator column and double click on <= (the less than or equal to sign). Now we make use of the Factor column: In order to screen for companies whose PE is less than or equal to half (50%) of its industry’s PE, click in the third cell of the Factor column and type in the number 0.5. (A more detailed discussion of using factors is presented at the end of this article.) To complete this criterion line, click in the third cell of the Compare To (field, value, industry) column. Then click on the + next to Medians and double-click on Industry.
The next criterion line for this screen begins by clicking in the fourth cell of the Field column. Click on the + next to % Rank, scroll down to % Rank-Rel Strength 26 week and double-click on it. Click in the fourth cell in the Operator column and double-click on >= (the greater than or equal to sign). Finally, click in the fourth cell of the Compare To column (not the Factor column). Click on the cell again so that you see a blinking cursor and type in the number 75.
To begin the final line of our screen, click in the fifth cell of the Field column. Scroll down the list of data categories until you come to Earnings Estimates and click on the + next to it. Scroll down the list of fields to Quarterly Surprise-Percent and double-click on it. Click in the fifth cell in the Operator column and double-click on >= (the greater than or equal to sign). Finally, click in the fifth cell of the Compare To (field, value, industry) column (not the Factor column). Click on the cell again so that you see a blinking cursor and type in the number 5.
Your screen is now complete and should look like Figure 2.
Now that the screen is complete, it is time to apply it to the entire Stock Investor Pro database. To make sure that you have no portfolios loaded, look to see that None appears in the Portfolio dropdown menu on the toolbar. The top right of the Screen Editor also tells you whether a portfolio has been loaded.
To apply this screen, click on the Apply button at the bottom right of the Screen Editor. Depending on your system speed, it may take a few moments for the screen to run. Dialog boxes will appear while the screen is running and while the companies that pass the screen are being loaded into the Stock Notebook.
As the screen is running, the number of companies passing each criterion line will appear in the Count On column. For example, in Figure 2, 5,255 companies passed the first criterion as of January 14. Knowing how many stocks pass a specific filter is useful, especially when a screen does not generate any passing companies. You are able to see which criteria are the most restrictive so that you can possibly relax the constraints to allow ( companies to pass.
When the screen is complete, a number will appear in the box next to the How Many button—this is the total number of companies that passed the entire screen. As of January 14, five companies passed this screen (Figure 2). To save this screen, click on the Save button. You will be prompted to name the screen and, if you want, to enter a brief description. Once you have done this, click on Ok, and you will return to the Screen Editor. To view the results of the screen, you can either close or minimize the Screen Editor to view the Stock Notebook.
Using the Help File in Screening
A common question among users is how to determine which data category a given data field belongs to. This information is available in the Stock Investor Pro Help System. Access the Help System by selecting Contents and Index from the Help menu at the top of the Stock Investor window (Help – Contents and Index). At the Help Contents window, select the Contents tab and double-click on Field Definitions.
As an example, to locate the data category for PE (price-earnings ratio), double-click on Alphabetical Listing of Field Definitions and again on the “P” (for PE). This will list all of the data fields in Stock Investor that start with the letter “P” in alphabetical order. From here, click on PE to bring up its field definition window (Figure 3). The field definition window tells us that the PE field is in the Multiples data category. Furthermore, we see that the value is displayed in decimal format and that percent rank and industry/sector medians are calculated for the field. You are also given a definition of the ratio.
Screen Editor Tips
The following section describes some of the unique data fields available for screening as well as other features available within the Screen Editor.
We made use of the Factor column in the first screen we created in this issue (Figure 2). However, a little elaboration on its use is necessary. When you are creating a screen, there are times when it may be useful to compare a variable against a fraction or multiple of another variable. This is where the “factor” column comes into play.
Figure 4 gives you another idea of how you can use factors. The first expression in this screen is looking for companies whose Yield (current dividend yield; found in the Multiples data category) is greater than or equal to 150% of (1.5 times) the median yield for the industry. The Factor column is multiplied by the field or value entered in the Compare To cell.
It is important not to enter values that are intended for the Compare To column into the Factor column. Doing so will create an invalid screen since you are in essence multiplying the value in the Factor column by a null value. If you create a screen and are not able to apply it, chances are you have entered a value in the Factor column that belongs in the Compare To column.
In the basic screen we created in Figure 2, we also used the Percentile Rank feature. Percentile ranks are useful when you want to see how a company’s result in a certain area—in this case, 26-week relative strength—compares with those of the entire universe of companies. In the sample screen, we were interested in those companies with relative strength in the top 25% of the database. This translates into looking for companies that are in the 75th percentile or better; thus 75 is used in the screen. No matter what field you use Percentile Rank with, the higher the value, the higher the Percentile Rank. A stock with a PE of 100 will have a higher % Rank-PE value than a stock with a PE of 10.
Medians & Averages
As shown in Figures 2 and 4, you can compare a field against a sector, industry, or universal median as well as the average for the entire Stock Investor Pro database. Medians are the midpoint values of a data set—there is the same number of values above and below the median value. This is different from an average, where the values of a numbered set are added together and then divided by the number of values. Medians are often preferred for financial values as they are not skewed by outliers—extreme data points that can impact the average value.
There are three types of medians you can use while screening: sector, industry, and universal. The sector and industry medians are the median values for those companies in a specific sector or industry group. Only selected data fields in Stock Investor Pro offer industry and sector medians (refer to the field’s data definition in the Help System to see if these are available). Most data fields can be screened using the universal average or median, which is the average or median value, respectively, for all companies in the Stock Investor Pro database. The obvious exceptions are date fields and text fields, such as company name.