XPEL
Happy New Year! While many of us would like to put 2020 in the rearview mirror for good, I want to take this opportunity to revisit 2020 one last time.
As an AAII member and A+ Investor subscriber, you have access to over 60 stock screens with daily updates of the companies passing each of these screens.
To access the complete list of all the stock screens AAII developed and tracks, select “Explore All Screens” from the Screening drop-down menu on AAII.com:
The link will take you the All Screens view, with a table listing the 60+ stock screening strategies AAII tracks:
For 2020, the top-performing AAII stock screen was the Foolish Small Cap 8 strategy, which posted a theoretical return of 142.5%. This performance figure is derived by calculating the average monthly return for the stocks passing this and every other stock screen each month. It is worth pointing out that the performance figures are not based on real-money investments, and they do not include some elements such as transactions costs (commissions, bid-ask spreads, etc.) or dividend reinvestments.
From this table, you can also sort all of the stock screens based on long-term performance. Doing so, we also see that the Foolish Small Cap 8 screen is the top-performing AAII strategy over the last three years (70.3% average annual price gain), five years (33.5% average annual price gain) and 10 years (18.1% average annual price gain). Since its inception, dating back to the start of 1998, the screen has posted an average annual price gain of 15.3%, which ranks 12th among all AAII stock screens.
In addition, the Factors column of the table indicates the underlying characteristics of the various screens. For example, the Foolish Small Cap 8 screen uses filters identified with growth (G), momentum (M) and size (S) investing.
To learn more about any of the AAII stock screens, you can click the link for a strategy from the table above:
Here we see a graphical representation of the Foolish Small Cap 8 screen’s performance since the beginning of 1998, as well as the average number of companies passing the screen each month (two) and the average monthly turnover (41.7%).
Scrolling down, we see the list of companies currently passing the screen, as of the close of the previous trading day, which in this case was December 31, 2020:
We will return to this list shortly.
We also provide an in-depth article describing the strategy and the rationale for the criteria it uses. And, since these are not “black box” screening systems, we also provide the exact screening criteria used to arrive at the passing company listings. Here are the criteria used by the Foolish Small Cap 8 screen:
The screen looks for smaller companies with revenue of no more than $500 million over the trailing four quarters. Since smaller companies, all else equal, are able to grow their sales and earnings at a faster rate than larger companies, the screen also looks for sales and earnings growth of at least 25% over the last four quarters. The screen also requires a net profit margin of at least 7%, which currently excludes roughly three-quarters of the stock universe.
Additional criteria that the screen employs includes a minimum daily dollar trading volume of $1 million but no more than $25 million (average daily trading volume multiplied by the current share price), a minimum share price of $7 and positive cash from operations over the last four quarters.
Lastly, the Foolish Small Cap 8 screen requires that a company rank in the top 10% of the stock universe in terms of price performance over the last 52 weeks.
To learn more about the companies passing any of the AAII stock screens, you can click on the ticker from the passing company list.
For the Foolish Small Cap 8 screen, the only company passing as of December 31, 2020, was Xpel Inc. (XPEL). Clicking on its ticker takes you to its Stock Evaluator page, which includes data and analysis that is exclusive to A+ Investor subscribers:
The Stock Evaluator page is designed to provide the data and information an investor needs to make an educated, unbiased decision as to whether to buy, hold or sell an individual stock.
The first page of the Stock Evaluator is the Snapshot tab, which is shown above. Here you will find select company and industry data to give you an overview of the company’s growth, financial strength, price performance and valuation.
A+ Investor subscribers will be able to take a deeper dive on the remaining tabs, including the Grades, Charts, News & Events, Valuation, Growth, Ratios, Analysts (analyst ratings), Earnings (consensus estimate data), Financials (detailed quarterly and annual financial statement data) and Insiders (insider buy and sell activity) tabs.
One of the most popular sections of the Stock Evaluator is the Grades tab. The A+ Stock Grades system is a stock-grading tool based on percentile rankings of multiple key metrics within five quant factors: value, growth, momentum, earnings estimate revisions and quality. They represent a summary of a company’s fundamentals and give you a quick overview of how a stock rates based on five investment factors that have been shown to produce market-beating results.
Not only do you get a letter grade for each of the five investment factors, but you can also see the percentile rankings of the underlying data points for each grade. In addition, we show the firm’s main competitors and their letter grades. These grades are calculated and updated daily.
Here we see the A+ Stock Grades for Xpel as of December 31, 2020:
Given the underlying criteria used for the Foolish Small Cap 8 screen, it is not surprising to see Xpel with a Growth Grade of B and a Momentum Grade of A.
The screen does not have any valuation component, which is why we should also not be surprised by Xpel’s Value Grade of F.
The Grades tab of the Stock Evaluator provides a deeper dive into the underlying variables used for the various Stock Grades.
At the Screening area of AAII.com you will also find aggregate stock grades for all the AAII stock screens.
On the All Screens table presented earlier, there is a Grades tab:
This table shows the average grades for each AAII stock screen based on the companies that currently meet the screen’s criteria. The passing companies and average screen grades are updated daily through the previous trading day’s close for A+ Investor subscribers.
Clicking on the down arrow to the right of each screen name will show you the companies currently passing the screen, their individual A+ Stock Grades and their sector, as defined by The Refinitiv Business Classification (TRBC).
By providing the average A+ Stock Grades for all of the stock screens, you get a clear picture of the types of stocks that pass each screen. This, in turn, will help you decide whether a given strategy fits your own investment philosophy. If you gravitate more toward value stocks, you may not be interested in stock screens where the average A+ Value Grades are consistently D’s or F’s. Likewise, growth investors may want to look past those screens with low average A+ Growth Grades.
