January 4th, 2022

Stock Screening Strategies That Make Money

The investment world is very interesting but risky.

The investment world is very interesting but risky. To be honest some of the investors are completely self-sufficient in the sense that they do their research before actually jumping into trading. They should be given appreciation but there is one big problem that lurks them. Most of them just base their actions on instinct (although it was mentioned above that they do their research).

They do not understand how to screen stocks to minimize the risks that may occur. Of course, every investment carries risks but when these risks can be minimized, trading targets will be easier to achieve. Screening stocks is highly recommended for every individual investor. If you are an individual investor, this article will be very useful. Keep reading!

By screening stocks, you'll be able to make much better decisions (though it won't be completely risk-free). Stock screening usually involves various data such as interest rates, economic indicators, potential energy sectors, and so on. As data, they are very important because what happens in the stock market cannot be separated from these variables. Screening stocks means classifying stocks that are not eligible to be selected. By avoiding them, you can focus on the ones that are worth choosing. In principle, it is very simple but of course in its application, it will involve various aspects. By avoiding “those who are not considered the best in their class”, you can minimize unnecessary risks. Remember that it's all about minimizing risk!

Every investor is advised to look for important indicators, which affect sales and revenue growth due to the purchase of a stock. The analysis required can be very complex but don't worry because in this article we will simplify the analysis.


Searching For Information From Various Media Channels


Every investor needs as much information as possible to assess what might have a significant impact on the market. But too much information can be counter-productive. When we are exposed to too much information, our focus is easy to get distracted, and as a result, we can make the wrong decisions. As an investor, you should focus on important information that can have a significant impact on the stock market. There is no need to delve into the intricacies of the industry like a professional analyst on Wall Street. You just need to understand what is driving the market. It is highly recommended for you to diligently watch business reports that are distributed for free in various media. Now is the era of the Internet, of course, it's even easier for you to find all kinds of information you need. For one piece of information, you should draw it from at least three sources so that you can draw an objective conclusion. 

Here is some information worth considering:


Interest Rate


Information about interest rates such as future upward or downward trends is very valuable. Any investor who can predict future interest rate increases or decreases with great accuracy will have the opportunity to make a lot of money. Various popular media such as Fox BusinessBloomberg, and CNBC can be a source of information for fairly accurate interest rate predictions.


Oil & Energy


OPEC oil production and domestic inventories are two very important data. These two data  points can be an indication of how a country can grow and when you are dealing with stocks related to that country you need data on global oil production and domestic stocks. The Wall Street Journal and Reuters are the two best sources for any data related to OPEC oil production.


Other Economic Indicators


Next are other economic indicators such as consumer sentiment, property growth, unemployment rate, job availability, and others. Each stock does not stand alone. It is closely related to social conditions in one or several countries. By analyzing economic indicators, you can consider whether your steps in buying a stock can be justified.

  • Types of companies to avoid

Stocks are the “face of the company” in the global market and analyzing a stock is the same as analyzing the company itself. To choose favorite stocks, we certainly need to know which companies are favorites. But faced with so many choices, an investor can be confused and have no idea how he or she chooses the best companies. One of the easiest ways to do that is to avoid certain companies. They may have a bad reputation or be in huge debt. If you can identify bad companies, you can certainly identify stocks that aren't worth buying. Some indications that a company is not in good condition are gross margins below 20%, operating as a distributor, and not being among the best in its class.

  • Avoid any shares of companies that have announced acquisitions

When a company has announced that it is going to make an acquisition, they are actually at risk of an unexpected big expense. Of course, these companies will probably get a large amount of income but what is often overlooked is that at the same time they are at great financial risk. You should not bet on such companies. Manhattan Bagel is a good example because the company went bankrupt just months after making an acquisition.

  • Identify companies that are likely to be successful in the not-too-distant future

This is the basis of stock investing because, in essence, we will be betting on the probability that a company will be successful within a certain period. Unless you are a long-term investor you will not want to choose a company that is likely to be successful 20 years after you buy the stock. It was a stupid decision. How to know which companies will be successful in the not too distant future? Here are some points to consider:


Fast Sales and Growth


If a company is posting “considerably fast” sales and growth, then the company has a healthy operational side. Universal measures are those that grow their top and bottom lines above 15%. This is the kind of benchmark that investors usually look for before they spend their money.


High Insider Buying Rate


The high insider purchases indicate that the company has confidence in its internal environment. If executives don't buy their company stock why should you buy it?


Solid Stock Movement Chart


This is a part of technical analysis and instead of trusting companies that “go up and down” unstable; you should pay attention to those with a regular positive trend. This will save you from market engineering. 


Only Buy What You Understand


We’ve come to the final strategy. You should only buy shares of companies that you understand. This may sound like classic advice but unfortunately, many investors fall into a loss as a result of ignoring this simple piece of advice. If you don't know what real products a company produces then avoid that company! Don't bet your money on "something abstract."

By carrying out the five stock screening strategies above, you can minimize the risks in buying shares. Of course, you will not be completely free from all risks but at least you can reduce them.

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