Screening for desirable stocks
The first step in a successful investment strategy is to locate stocks which best match the investor’s view of good stocks. For example, one may be seeking stocks with high earnings growth, low price-to-earnings ratio (p/e) and good analysts’ ratings. Traditional investing tools force the user to translate general concepts such as ‘low p/e ratio’ into arbitrary filters such as ‘p/e must be less than 20’.
There are numerous problems with this traditional approach. First, the arbitrary choice of limit values such as the p/e of 20 may or may not truly represent the investing concept of ‘low p/e’. Second, even if 20 is a low p/e today, it may not be a low p/e tomorrow or next month. Finally, when multiple filters are applied, there could be anywhere from zero through thousands of stocks which pass all of the filters — the result is unknown.
Stockworm takes an alternative approach. We rank every parameter for every stock within our database so our programs always know what ‘high p/e’ or ‘low p/e’ is, regardless of the current market conditions. Stockworm can therefore directly blend investing concepts such as “low price-to-earnings ratio” and “good analysts’ ratings”, resulting in a ranking of stocks from best to worst match of the investing requirements, as illustrated below.
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The concept of ranking-based screening is core to the Stockworm offering. However, we recognize that sometimes a 'filter' is required, such as when limiting the stock universe by market capitalization. |
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In most of the discussions here you will see an emphasis on fundamental analysis. Stockworm does have extensive technical analysis (TA) capabilities which can be integrated into any portfolio management strategy. However, TA tends to invoke visions of day-trading which we do NOT support. As such, we tend to de-emphasize this aspect of our toolset unless TA is specifically called upon.
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