how to use stock screeners to find value stocks
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DESCRIPTIONA presentation I used with founder of Screener.co, Lenny Grover. We discuss how he developed the technology to put incredible investing research power in the hands of individuals. Lenny also shares the criteria he uses when looking for value stocks.
- 1. How to use technologyto pick winning stocks FinToolbox/Screener.coMonday, September 26, 2011
2. My background management consulting generic frameworks for data analytics VC analyst ownership mentality extreme buy and holdMonday, September 26, 2011 3. FinToolbox/Screener.co atait ies ddtun ckeor , la pp taing ,o beppash ed shoh- crch sal e as laun 200920102011Monday, September 26, 2011 4. Investment MethodologyMonday, September 26, 2011 5. Investors struggle with too many decisionsMonday, September 26, 2011 6. Investing as exclusionary processlook for reasonsnot to investMonday, September 26, 2011 7. Screening process = investment candidateMonday, September 26, 2011 8. Continue looking for reasons not toinvestMonday, September 26, 2011 9. E ST T cyclical valuationsvs.acyclical declines outside knowledge intuitionMonday, September 26, 2011 10. Review public lings/public info Material changes to business risk factors long-term obligations management/analyst forecasts news (Internet trafc, industry data/reports, new products) Still looking for reason not to investMonday, September 26, 2011 11. Red ags?Monday, September 26, 2011 12. MetricsMonday, September 26, 2011 13. Dene custom metrics in addition to those normally usedMonday, September 26, 2011 14. Metrics used for exclusion Still need full company checkupMonday, September 26, 2011 15. Valuation 1. EV/EBITDA (in addition to P/E)1. target 3x to 6x for value2. 6x to 10x if willing to pay up for strong growth + interesting (growth) markets 2. Price/Net Tangible Assets (in addition to P/B)1. .5x to 1.5x for value companies (in other words, NTA/ Market Cap >.67x) 2.Caveat: beware too many long-term or illiquid assets, particularly for nancials. New accounting rules since credit crisis give more leeway in valuing illiquid securities and whether PP&E and other long term tangible assets reect true value depend on how their depreciation schedule reects actual depreciationMonday, September 26, 2011 16. Valuation (contd)1. Margin of Safety/Downside Risk1. NCAV1. NCAV5 butexible)Monday, September 26, 2011 18. Consistency of results 1. Multi-period comparisons ofrevenue and net income 2. Estimates relative to pastperformanceMonday, September 26, 2011 19. Consistency of results[contd] looking for stability and or growth. Screener.co supports up to 10 quarters/years but I rarely go that far back (unless looking at PE10) Now, I nd looking at how companies performed during the last recession (2008-2009 full years) an interesting metric, gives a sense for how the company holds up during the bottom of the economic cycle Even for cyclical companies, I like to see that they are able to maintain protability or have modest cash-losses relative to their balance sheet (so they are not likely to get into distress even during a prolonged downturn) Use estimates to look forward and ensure future expectations are not dramatically poorer than past performanceMonday, September 26, 2011 20. Q&AMonday, September 26, 2011 21. How to use technology to pickwinning stocksLearn more: Screener.coMonday, September 26, 2011