Tech and Tools

How to leverage stock screeners to find compelling stock opportunities

stock screeners

he stock market universe consists of thousands of individual companies, many of which are extremely undervalued. At any given point, there will be many hidden gems that offer early investors explosive growth potential.

The only problem is finding them before their growth cycle gains momentum and other investors and hedge funds catch on. The use of penny stock screeners and screeners for higher-priced stocks offers investors the potential to uncover attractive stocks before they become expensive. 

What Exactly Is A Stock Screener?

As the name implies, a stock screener is a tool that screens stocks based on specific criteria chosen by the user. The advancement of technology in recent years made it possible for anyone to filter out thousands of stocks to identify potential investment ideas based on their own factors within seconds.

In essence, stock screeners are an essential tool for investors that have no interest in investing in FAANG and other stocks the financial media universe never stops talking about.

Stock investors should use a stock screener every day because of the ever-changing nature of the stock market. What would have been a stock that didn’t’ satisfy an investor’s criteria on a Tuesday could become a very desirable stock on Wednesday.

Use One Or All Of The Criteria Filters

New investors playing around with a stock screener for the first time could find themselves overloaded with too much information at their fingertips. But take a deep breath, and relax. Stock screeners for the most part are designed with the novice investor in mind.

Here are many examples of how a stock screener’s criteria can be used to identify investment opportunities.

Price

  • Dollar amount change: Identify all stocks that lost at least $5 per share over the past 30 days.
  • Dollar percentage change: Identify all stocks that are down at least 40% over the past 90 days.
  • Lows: Identify all stocks that hit a new 52-week low in the past 120 days.

Liquidity

  • Volume: Identify all stocks that trade at least 5 million shares on average daily.
  • Volume dollar traded: Identify all stocks that trade at least $20 million worth of shares daily.

Fundamentals

  • Market Cap: Identify all stocks with a market capitalization between $300 million and $1 billion.
  • EPS: Identify all stocks with an earnings per share (EPS) of at least 35 cents.
  • Sector: Identify all stocks within the real estate segment.

Time-Sensitive Data

  • Earnings: Identify all stocks that reported earnings within the past 72 hours.
  • Filings: Identify all stocks that disclosed a SEC filing within the past week.

Is A Stock Screener The Same As A Stock Scanner?

Newcomers to the stock universe shouldn’t be faulted for not being familiar with all the tools that are available to them. Some make a common mistake of associating a stock screener with a stock scanner.

Both are great tools to help investors find stock winners but the difference between the two mostly relates to timing. A stock screener offers investors static information — that is the data presented is not updated in real-time. The investor would need to refresh their search query or introduce new criteria to scan for more up-to-date findings.

On the other hand, a stock scanner performs the same basic function of identifying stocks based on an investor’s criteria, but results are displayed in real-time. New stocks that satisfy the investor’s criteria will flash on their computer or they will get a stock alert that displays the new information.

Generally speaking, a stock scanner provides less value to an investor but would be vital for stock traders to make a living.

Main Benefits Of Using A Screener

The most immediate and apparent benefit to using a stock screener is that it saves investors a lot of time. It could take days to gather data and sort through hundreds of stocks the same way stock selectors did their research 30 years ago. This would surely lead to investor frustration and ultimately giving up on investing.

Another main advantage of a stock screener is it opens up investors to the entire universe of stocks. Each and every stock is a potential candidate, regardless if they operate in an old-school industry like pharmacies or grocery stores, or industries of the future like artificial intelligence, autonomous driving, and 5G telecommunication.

Another reason why many investors swear by their screener has to do with risk management. An investor tells the screener what stocks to find based on their particular criteria so logic dictates that if a stock doesn’t make it onto the list, it simply shouldn’t be bought. 

Conclusion: Screeners Are A Great Starting Point

Using a stock screener is an excellent starting point for investors looking to identify opportunities. Basing investment decisions solely on a screener is more often than not a path towards losses.

Consider this scenario: an investor might want to scan for a real estate company that reported earnings in the past 72 hours and recently traded at a new 52-week low. This information would act as a starting point for more in-depth research. Was the recent weakness indicative of long-term structural issues or did the company simply have a poor quarter due to factors outside of its control?

Stock screeners are one of many tools used by investors. As the example above shows, a stock that satisfies an investor’s criteria can either prove to be a fantastic or terrible investment. 

Only proper research and homework will offer a clear answer.

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