Stock screens shouldn't scare you. A page full of screening criteria may look intimidating -- but you needn't touch the vast majority of them to come up with a useful investing tool.
In fact, simple screens often return the best results. Let's run through a quick and easy example, you and I.
Let's get this party started!
OK, I'm a longtime fan of small stocks that could multiply into industry giants one day -- and bring my portfolio along for the ride to the stars. I am also a huge geek, and like fellow nerd Tim Beyers, I believe that tech stocks will make me rich. So let's slap together a simple CAPS screen to help me find high-quality stocks that meet these criteria. We will:
- Look at just the Technology sector, true to my creed.
- Hit the "small-cap" preset market cap range, which sets a minimum cap of $250 million and a maximum of $1 billion. This weeds out unstable micro-caps but keeps the focus small enough to let that tiny cap multiply many times over.
- And I said I want quality companies, right? A five-star CAPS rating will show only the stocks that can impress thousands of my fellow investors. Finally, I believe that the ideal small company carries no debt at all -- it's a low-risk business model, and truly great managers know how to grow off of cash flows alone.
This simple screen returned 21 results for me. Feel free to adjust the criteria and try it for yourself, keeping in mind that you're shooting at a moving target so your mileage may vary. And I find these findings very encouraging:
| Company |
Market Cap (in Millions) |
1-Year Return |
|---|---|---|
|
Cogent (NASDAQ:COGT) |
$957 |
2% |
|
Infinera (NASDAQ:INFN) |
$669 |
(30%) |
|
Netgear (NASDAQ:NTGR) |
$666 |
22% |
|
Universal Display (NASDAQ:PANL) |
$402 |
(21%) |
|
Sigma Designs (NASDAQ:SIGM) |
$382 |
(6%) |
|
VASCO Data Security International (NASDAQ:VDSI) |
$302 |
(39%) |
|
Total imaginary portfolio returns: |
(12%) | |
|
S&P 500 returns: |
(17%) |
Market data and stock returns from Yahoo! Finance.
Why am I excited to see these stocks? Well, I happen to know a few of them quite intimately -- and I already know that they're great. OLED technologist Universal Display has been a part of my own portfolio for four years, and I can see the OLED market unleashing a cascade of cell phones, TV screens -- even light fixtures -- very, very soon. The Samsung phone I'm drooling over has an OLED screen, for example -- and Samsung is a well-known partner of Universal's. (Who invited Peter Lynch to this party?)
- The Fool itself has put real-world money into Infinera, which specializes in high-speed optical networking. Could this be the next Cisco Systems (NASDAQ:CSCO)? As the world continues to thirst for bandwidth-hungry video feeds and other rich entertainment options, this optical data switching expert could very well fulfill that promise.
- I've even singled out VASCO as a potential multibagger before, based on brilliant results that seem to get no respect in this market.
- And as you'll see in the disclaimers below, this simple search uncovered a plethora of formal recommendations from several of our newsletter teams. In a few easy clicks, I have at the very least landed in the general neighborhood of what the newsletter guys spend all their time finding -- excellent investment opportunities for the everyday investor like you and me.
What's next?
Of course, the official recommendations stop right there. Don't take my short list as absolute gospel, but do take it as a starting point for your own research. If you're okay with debt loads, even for small companies, you could relax my stringent no-debt criterion and run the screen again. Maybe you want to invest in companies that produce consumer goods right now, because you figure it's high time to take advantage of historically low share prices? Go ahead, make my day.
And from your list of results, you’re only a couple of clicks away from all the data our CAPS system keeps on each stock. You can get raw financial data, SEC filings, stock charts, and nuanced opinions both pro and con from your fellow CAPS members. It's fun, it's potentially enriching -- and the whole thing is 100% free. Why not get started today?
