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AAII Stock Ideas First Cut Stocks

All-Stars: Stocks That Pass Multiple Screens

Looking at stocks that pass multiple screening approaches can be valuable if the approaches are based upon solid financial principles and are diverse enough to capture unique yet desirable qualities.

by Derek J. Hageman | March 2023

Derek Hageman leads a class in AAII's new Essential Investing Video Course. Go to https://www.aaii.com/ves for more information and to subscribe.

This month’s First Cut Stocks lists those that passed the greatest number of screens tracked by AAII at the Screening area of AAII.com. We examine the results of every stock screen and identify stocks passing more than one strategy.

As of February 7, 2023, 1,362 stocks passed at least one of the screens tracked by AAII, but only 15 stocks passed five or more screens. Those 15 are the ones making the First Cut Stocks this month.

In looking at the stocks that pass the screens, an interesting question arises: Is a stock that passes multiple screening approaches more attractive than another stock that just passes one screening approach? Possibly, if the screening approaches that a stock passes are based upon solid financial principles and are diverse enough to capture unique yet desirable qualities.

The stocks are ranked by how close their current price is to their 52-week high price. The table lists the price-earnings (P/E) ratio (price divided by trailing earnings per share) as a basic valuation measure. The annual earnings growth rate provides a simple historical indication of the bottom-line company performance over the last year and last three years. The market capitalization (number of shares outstanding times the share price) is a common way to measure the size of a firm.

Of the 15 all-star stocks that passed the most screens, nine of them passed the Buffettology EPS Growth screening strategy. Warren Buffett believes that a successful stock investment is a result first and foremost of the underlying business. Its value to the owner comes from the company’s ability to generate earnings at an increasing rate each year. Buffett seeks first to identify an excellent business and then to acquire the stock if the price is right.

For an updated list of stocks passing the most screens, go to https://www.aaii.com/stockideas/myscreens and select the Stock Passing Multiple Screens tab.

Stock All-Stars Passing the Most Screens (Ranked by Price as Percent of 52-Week High Price)

Discussion

DWIGHT W from TX posted over 3 years ago:

Has anyone come across research on an individual stock’s performance vs. its benchmark, that passes multiple and hopefully diverse screens? The potential for strong Alpha seems possible, as well as outperformance in various market conditions if the screens are diverse and less correlated with each other. Very good search Mr. Hageman! I just hope we have some research we may refer to that backs up the validity of the idea?


ROBERT A from NC posted over 3 years ago:

I agree with Dwight. I'd like to see some backtested research to see how passing stocks would have performed over a long period (at least 50 years). Otherwise, I have nothing on which to base a decision as to whether a screen has real value. It's also very dissatisfying to see the published returns of screens when those returns are based on holding the underlying stocks only as long as they continue to pass the screen. In other words, they're based on exceedingly high turnover with purchases and sales occurring at just the right times and without taking taxes into account. I want to see more research that benefits us long-term investors.


BARRY J from TX posted over 3 years ago:

This looks impressive. 15 (or 9) out of 1,362. But remember what EVERY broker tells you about ALL data they provide to try to woo you: Past performance is no guarantee of future results. They do this for a reason. The reason is … past performance IS no guarantee of future results. The rule also applies to backtesting. If it was that easy, we would all be rich and the investment industry would charge 2.5% AUM + 20% return fees to everyone.


Sneha J from IND posted over 3 years ago:

Hi MY GREETINGS I tried the following parameter / matrix (norms) for hunting GARP [Growth at Reasonable Price] Stocks on FINVIZ Stock Screener...…: {From Left to Right} 1) P/B Ratio = Under 4 2) Quick Ratio = Over 1 3) P/E Ratio = Under 20 4) EPS Growth next 5 Years = Positive (>0%) 5) LT Debt / Equity Ratio = Under 1 6) Sales Growth past 5 Years = Over 10% 7) Return on Equity = Over +15% 8) Debt / Equity Ratio = Under 1 9) Analyst Recom = Buy or better 10) PEG Ratio = Low (<1) 11) RSI = Oversold (40) 12) Price to Sales Ratio = Under 2 13) Current Ratio = Over 1.5 Infact I wanted to add one more norm viz. >Trade Debtors average velocity = 90 days or Less but this norm seems NOT available on the said Stock Screener. If ALL the above norms are made applicable simultaneously you will get only handful of Stocks however, you will further need to analyze their fundamentals may be from 'www.tipranks.com' & AAII for Smart Score & Analyst Rating. Please try yourself. MY BEST WISHES FOR HAPPY INVESTING!!!


BARRY J from TX posted over 2 years ago:

Follow-up report. As impressive as this list of the "best of the best" of AAII stock screens, I decided to heed the shop-worn caution to do due diligence on these "all-stars." First, I sorted out the best of these 15 based on their "lowest of the low" P/Es and "highest of the high" EPS performance and then entered the remaining "Final 4" into a stock compare app at one of my brokers to run my due diligence. When I got down to the last page on "Financial Strength," only 2 of the 15 still qualified by my criteria.


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