Selecting good stocks isn't easy. Whether you're focused on small cap growth or large cap value and everything in between, there are so many stocks to choose from.
With roughly 15000 publicly traded companies listed on major U.S. exchanges and in various over-the-counter markets, the task of separating the outstanding companies from the rest can be a very daunting task. But with the assistance of some free stock screening tools, this part of the research process can easily be simplified.
***The sheer volume of publicly traded companies makes finding a good small cap stock difficult. Add in the enormous amount of stock data available on each stock, and it's easy to be overwhelmed. Fortunately, a stock screener can help you focus on the stocks that meet your standards and suit your strategy. In this issue of SmallCap Investor Daily, I'll discuss how you can use stock screeners to make your investment research time even more productive by looking into the right stocks.
A stock screener is a powerful tool that helps to assist in finding stocks based on certain financial criteria. A screener is comprised of a database of companies, a set of variables and the screening engine that finds the companies that meet your defined variables. The result of the search is a list of companies that meet your defined criteria.
Using a stock screener is easy. All you have to do is know the metrics and variables that you require for your stock search. Think of it as being like Google, but for finding stocks. With this software, you can define a wide range of criteria including market capitalization, industry, P/E ratio, and revenue growth. While these are just samples of searchable criteria, the list with most of these software solutions is much more extensive.
***Let's go through an example using one of the best free stock screeners on the internet - FinViz.com.
We really like Israeli tech stocks and actually hold a few in our Small Cap Investor Pro portfolio. That being said, let's say we are looking for a small cap Israeli technology stock that trades on the NASDAQ, has a P/E ratio below 25 and has net profit margins over 30 percent.
The first thing we want to do is click on the screener tab on FinViz.com. Once we are on the screener page we then want to then click on the "All" tab.
Here is what the screener looks like on FinViz.com:
After we enter these criteria into the screener, the software gives us the list of companies that make it through each of our filters. You can see our requirements highlighted in yellow.
***Because my search criteria were very specific, there were only two companies that fulfilled the requirements and are now worthy of further analysis. · Commtouch Software Ltd. (NasdaqCM:CTCH - News)
· Mind C.T.I., LTD. (NasdaqGM:MNDO - News)
Readers of SmallCapInvestor Daily know that I already wrote about Mind C.T.I. last month in a daily article, "SmallCap, High-Yield Israeli Tech Stock Primed For Growth".
In tomorrow's issue of SmallCap Investor Daily I will examine Commtouch Software. I will use a few of the key metrics I have discussed lately including PEG and Sales Growth.
As you can see screens can be a great starting point for your research process as they save time and narrow your options down to a manageable group. Knowing how to screen and specifically what to look for is a major battle for most investors that go it alone. That is why we are here to help you along the way. I intend to go through screens on a regular basis to help you with the process of finding great small cap stocks. Once we find potential companies you can do the rest of the research yourself or you can join our SmallCapInvestor PRO investment newsletter service and let us do the research for you (just click here now to try the service today - 100% risk free).
Without a proper stock screener and 15,000 publicly traded companies, you really are lost. There are a myriad of tools and metrics available for you to evaluate a whole variety of aspects of a stock. Make your life easier and take advantage of these free tools. Start screening your stocks today to uncover real value and find the hidden gems that grow your portfolio to new heights.