18 All-Star Stocks You Should Look At

We’ve been highlighting a few ideas that can help you replenish your portfolio through sound strategies with good long-term performance to help you navigate the current volatile market. The April AAII Journal, which was posted at www.aaii.com/journal on Wednesday, April 1, includes a First Stock stock screen that shows the stocks that pass four or more of the stock screening strategies we track. Since this list was created in the middle of March due to our printer deadline, here we present an updated list using data as of March 25, 2020.

Please read on to learn more about our All-Stars.

The Value of Building Stock Screens

Over the years, we have studied the works of many famous and successful investors. Our desire 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. Our goal has been to use this knowledge to create screening strategies that investors can use to identify interesting investment candidates.

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 to 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.

There are around 40 stock screening strategies on AAII.com derived from the works of successful gurus, along with 20 screens based upon academic research or investment factors that help you identify investment ideas. The screens range from deep value approaches following the philosophy of investment gurus such as Benjamin Graham to earnings and price momentum strategies espoused by William O’Neil.

Stocks That Pass the Most Screens

In looking at the stocks that pass the screens, an interesting question arises: Is a stock that passes multiple complete 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.

There are around 1,000 stocks that currently pass at least one of the 60 screening strategies we have on AAII.com, but there are only 18 stocks passing four or more screens, and they are the stocks that are presented below.

The stocks are ranked by how close their price relates to their 52-week high price. With the dramatic market downturn, some companies had bigger declines and these stocks would be toward the bottom of the table. For example, Smart Sand Inc.’s (SND) closing price of $0.93 is 80% off of its 52-week high price of $4.62. Smart Sand is frac sand supply and services company. Domestic oil producers are hurt by the oil price war initiated between Russia and Saudi Aribia coupled with lower demand from the sudden slowdown of economic activity.

For the most part, the stocks currently passing multiple screens are passing contrarian or value approaches that identify companies with low prices relative to company financial measures such as assets or earnings. For example, the Fundamental Rule of Thumb screen combines earnings yield, dividend yield, earnings retention levels and return on equity. All of these elements are well known and well used by value investors. When combined, a score is computed that can help indicate if a candidate merits further analysis.

The table lists two price-earnings ratio calculations: one based upon trailing earnings per share, and one that is determined using forward earnings expected for the current year. The price-earnings ratio is a basic valuation measure, but it can be more difficult to use during economic turning points. If you see a forward price-earnings ratio that is higher than the trailing ratio, it indicates that analysts are expecting future earnings to be lower.

The market capitalization (number of shares outstanding times the share price) is a common way to measure the size of a firm. Booking Holdings Inc. (BKNG) is the largest company to pass four or more screens with a market cap of $51.7 billion. Booking Holdings—likely better known under its former name of The Priceline Group—is struggling from the sudden slowdown in travel, hotel and even dinner reservations. Its brands include Booking.com, Priceline, Agoda, KAYAK, Rentalcars.com and OpenTable. Analysts have slashed current earnings by 35.9% over the last three months. That explains why the forward price-earnings ratio of 18.6 is above the trailing price-earnings ratio of 12.2.

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.

Stock All-Stars

All Star Stocks: Stocks That Pass the Most Screens (Ranked by Price as a % of 52-Week High)

For more on the AAII Stock Screens, visit https://www.aaii.com/stockideas/allstrategies.

Daily updates on these and other stock lists are available to you on AAII.com free of charge for a limited time, but if you are looking for an edge throughout these volatile times, consider subscribing to A+ Investor.

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