Are you in search of those perfect stocks that can ring in profits for you? But feel overwhelmed to find them from the myriad of stocks listed on the US stock exchange? This article outlines the most important benefits of a stock screener that any investor seeking the best stocks needs to be aware of.
Well, fortunately, for you, there is a tool that can help you streamline and hasten your search process in a matter of seconds. Enter the Stock Screener – an investor’s tool for screening stocks quickly.
If you’re one of those investors who has had to screen stocks the old-fashioned way, then you would certainly not forget the painstaking and time-consuming process of screening them. Fortunately, the stock screener makes the screening process easier for you and saves you ample time.
In this post, we’ll look into what a stock screener is, how to use a screener, the benefits of using a screener, what should you look for in a screener and other pertinent questions as we go along.
What is a Stock Screener?
A stock screener is a tool that facilitates the filtering of stocks from a multitude of available stocks in a matter of seconds, a process that would generally take days or weeks if done manually. The significance of this tool is that you can filter stocks based on search parameters that you define. The higher the number of filters you apply, the smaller will be the number of stocks that will reach your results list.
For instance, if you use revenue growth as a parameter in a stock screener, it can help you find high growth stocks. A high growth stock is one where the company’s revenue growth is situated well within double digit percentage points.
Importantly, it also helps in discovering stocks that you may not be aware of. It assists you to be organized in identifying stocks that fit the criteria set by you.
When speaking of their availability, you could find them on some investing platforms, such as Yahoo Finance for free. Others make their screeners subject to a subscription fee. Our own Zigmma stock screener which helps you in finding stocks at a lightning speed is both powerful and free.
Remember, stock screening only aids you in quickly filtering out the stocks that fit the search criteria set by you. It doesn’t mean that you need to cut down on researching. It’s important that you should further research the candidates from the screening results because these results are not the final buy list.
How to Use a Stock Screener?
You know that there are repositories of stocks available in the stock markets. Using a stock screener can help you filter stocks from the myriad of stocks available in the US listings so that you can make informed investment decisions that can yield gains for you. Generally, most of the screeners include three components:
- A huge database of listed companies
- Search parameters
- And a screening engine that helps in filtering the stocks based on the parameters.
These screeners are pretty easy to use. The conventional way of accessing them is through online stock screening tools. After you have access to the screening software, what you need to do is to answer some questions first. Some of these are:
- Are you interested in small-cap or large-cap companies?
- What companies do you prefer? Companies whose stock prices are at an all-time high or companies whose stock prices have dropped very low?
- What range is acceptable for you when talking about the price to earnings ratios (P/E) parameters?
- Do you have any specific industry in which you are looking for stocks?
The answer to this question determines your parameters. You can further narrow down your search by adding more parameters till you get the result that you are looking for. Ultimately, you’ll have stocks that meet your requirements.
Example of Using Stock Screener
Stock screeners have many tools to work with. At first, looking at them could make you feel a bit nervous. This is because of the presence of the sheer number of parameters in both the technical and fundamental sides of the screener. So, before plunging into the screeners, it is wise for you to consider some questions like what do you want from the screener, what are your priorities, the types of financial instruments that you are looking for and finally, decide whether you want to work on the technical side or the fundamental side. After considering these questions you are ready to start using a stock screener.
If your investment strategy is to work on a short term investment in a company then you can consider working with different technical indicators like relative strength index (RSI), MACD, on-balance volume, charts and more.
On the other hand, if your investment strategy is to work on long-term investment in a company then a better option for you is to consider different fundamental indicators like market cap, return on equity (ROE), price to earnings ratios, revenue growth, financial leverage and many others. Such important data from these tools can help you create a portfolio that focuses on long-term investments in companies.
5 Benefits of Using a Stock Screener
If you’re still figuring out whether to use a stock screener then these benefits might help you in clearing your doubts. Here are some of the key benefits of using a stock screener:
It Saves Time
Imagine analyzing tens of thousands of stocks in the stock market. Sounds very tiresome. Doesn’t it? Generally, an old-fashioned way of finding stocks would be going through every company’s financial details, assessing each of the company’s historical performance, forecast each of their future growth prospects and also looking into other important data. All of this would be a tedious, stressful and time-consuming process. Right!
Now, if you consider taking this route then it would take you ages to find stocks. This is where a stock screener saves you time. A screener cuts down this tedious process by introducing parameters that will find you stocks in a matter of seconds according to your investment goals.
You just need to select your metrics for the screen and the screener will do the rest. It will remove the stocks that don’t fit your requirements and give you stocks that perfectly fit your search criteria.
A Stock Screener Removes Behavioural Biases
Have you ever made decisions based on your emotions? Most investors do. They get carried away by their emotions and invest in stocks that ultimately affect their return on investment.
Suppose you have been regularly shopping at XYZ company and you like the product of that company. Now, you may convince yourself to invest in XYZ company’s stock just because you know that company and like their products, although they don’t have any attractive returns. Here, you’re committing an investment blunder because of your bias towards that company. This is where a stock screener will remove all bias and illogical decisions and find you stocks purely based on arithmetic. By removing emotional biases from decision making, you will be able to avert potential losses.
A Stock Screener Helps You Identify New Investment Opportunities
Often what happens is that people tend to miss out on hidden gems and lose out on great opportunities. A major benefit of using a stock screener is that it uncovers hidden investment opportunities that have the potential to generate significant returns.
A stock screening database may have thousands of stocks. It can uncover stocks that you never have heard of. Usually, the underrepresented stocks are overlooked in the market. So, there is an opportunity for a shrewd investor, using a stock screener to identify the hidden gems and drive gains from them.
Ziggma’s Stock Screener Enables You to Save Screens for Future References
A unique feature of the Ziggma stock screener is that you can save a particular screen for later use and come back, restart your screening process from where you have left off. With all the parameters being intact as you left them. You can hasten your screening process by loading the saved screen.
A Stock Screener Keeps You Updated on Current Stocks
Most stock screeners can help you in becoming an efficient investor, by providing you with all the latest financial information. You can visualize live price charts of the stocks by hovering over the stock can assess them and make an informed decision based on recent price action.
How Will You Know If Your Stock Screening Strategy From the Screener Has Worked?
A highly complementary tool to a stock screener is Ziggma’s backtesting tool. It helps in testing the performance of your screening strategy. In other words, this tool will let you know how well your stock screening strategy has worked in the past. Based on the analysis you will get a sense of how your strategy will work for you in the future. Of course, it will not guarantee success in the future but it will give you a rough estimate of your quality as a stockpicker.
What Should You Look For in a Stock Screener?
Manual screening for the right stock from hundreds and thousands of stocks can be painstaking and time-consuming. A stock screener helps you solve this problem. It facilitates your screening process and gives you stock ideas at a lightning speed.
There are plenty of stock screeners available in the market. So, why does Ziggma’s stock screener that give the best results? It starts with design. We did away with dropdown menus and manual entry of search parameters. Thanks to sliding scales you get great results with in a matter of seconds.
Also, Ziggma’s screener helps you handle the investment strategies that you have devised to use in your desired markets for investments. Our stock screener fits with any investing approach from value to income to growth. This is important because some stock screeners are suited only for day-trading. Ziggma’s stock screener is tailored to long-term investing and all imaginable styles. It’s just the right stock screener.
Another important aspect of a good stock screener is accurate data. Check whether the stock screener gathers accurate data from trusted sources.
Your screener must have robust data points, markets and stock exchanges and it should be capable to screen stocks according to the parameters that you enter. So, this means that having any extra features without the mentioned ones is of no use.
In addition to this, you should also check whether the screener has the capability of saving screens. Imagine what would happen if you didn’t have a saving screen feature and wanted to refer to the screening data from where you left off. Frustrating, isn’t it? So, what does this tell you? That every stock screener should have a saving screen to let you continue with your screening process smoothly without any disruption. Even the pre-defined parameters that you have set will remain the same.
Don’t Know What to Screen For?
If you say ” I don’t know what criteria to include in the screener for searching stocks” then you are not alone. Most investors face this challenge when screening stocks. This happens because of the presence of a multitude of variables to choose from, which can make any investor get overwhelmed.
For investors who don’t know what they are looking for and the reason they are looking for it, the stock screen doesn’t assist them much. So, for such investors, Ziggma’s stock screener with its pre-configured stock screens it is an ideal starting point.
Do Stock Screeners Have Limitations?
Even though stock screeners help investors in quickly sorting out stocks from a huge database, they have their set of drawbacks. Even the most useful tool has its set of limitations. Doesn’t it?
Stock screeners use only quantitative parameters like technical and fundamental indicators. Technical indicators like relative strength index (RSI), MACD, on-balance volume etc. and fundamental indicators like market cap, return on equity and others. They don’t include qualitative parameters like customer satisfaction, management issues, labor issues, any pending lawsuit and among others. Although ESG scores for which you can set a range in the Ziggma stock screener capture these at a high level.
Apart from screening stocks, you also need to be aware of one important fact, as mentioned above, remember not to cut down on your research after you get a list of stocks from the screener.
Don’t assume that these lists of stocks are the final buy lists. Screener results give you a head start, from there you need to do work around to invest in the perfect stock. Make sure you do research on qualitative factors such as legal issues related to the companies, governance issues and other such factors.
Along with this valuable information and using the screener’s list of stocks, you will be able to make effective investment decisions. If you are able to use stock screener software along with the valuable research then you are poised to become a successful investor.
If you are serious about investing in stocks then a tool like stock screener software could come in very handy for you. In the US, you must be aware of the fact that thousands of stocks are available on the stock exchange and screening all of them by yourself would be a painstaking and time-consuming process.
In other words, it is a herculean task to achieve. This is why you have be aware of the most important benefits of a stock screener. A stock screener is a tool that will help you in filtering out stocks in a matter of seconds that will meet the requirements of your investment strategy. It is a potent tool that has the potential to make you an efficient investor.
If you use a stock screener then it saves you time in the screening process, removes emotional bias and filters stocks based on logical findings. It also helps you identify new stocks that you might be unaware of, keeps you updated on the latest news regarding stocks and it enables you to save screens so that you can refer to them in the future. These are some of the top benefits you can get when you use a stock screener.
However, they have their share of limitations, a screener includes quantitative parameters like technical indicators and fundamental indicators like market cap, return on equity and other such indicators. It doesn’t include qualitative parameters like customer satisfaction, corporate governance and other such things.
As a final thought if you want to shift the odds in your favor then certainly you should use a stock screener like the Ziggma’s Stock Screener.