There are a lot of individual stocks out there to buy, approximately 8,500 companies and securities are listed on the New York Stock Exchange (NYSE) alone. So, how do you go about finding those diamonds in the rough? How do you separate the wheat from the chaff?
Stock Screeners. I like to find new stocks to consider buying through an online stock screener. I personally use the Yahoo Finance and Google Finance stock screeners. Yahoo Finance lets you input several key attributes that you are looking for in a stock in to the online computer program. You can reduce the number of companies by looking for specific ranges of share price, market capitalization, dividend yield, beta, revenue, industry, profit, earnings growth, and a host of other metrics. The stock screener program on the websites then whittles the universe of 8,000 stocks down to a manageable list of ten to twenty that will enable you to conduct more in-depth research.
The Google Stock Screener lets you use sliding bar graphs to trim the number of stocks you are looking for based on the criteria. I especially like that Google Finance’s stock screener lets you compare companies that have been recently beaten up in the market. I routinely look for companies that are off of their 52-week high price in the hopes that they will once again return to those highs of their stock price. Like I have said time and time again here, I try to live by the age old stock market adage, “Buy low, sell high.”
Example. I used these inputs to drawdown the list of stocks and find some good companies to invest in. In Google Finance, I entered: market capitalization between one million and 300 million, P/E ratio between 5 and 15, dividend yield between 2% and 20%, and up to a 100% drop from their 52-week high. You can also add search criteria such as earnings per share (EPS) and earnings per share growth rate for the past year.
Results. I ended up with 111 stocks to choose from across all of the different stock exchanges such as the NYSE and NASDAQ. As I look through the names of the companies, I am personally biased and quickly eliminate all financial stocks, automobile makers, and airlines from the list. I am left with several companies that we all have heard of such, and the list also contains a few new companies that I am not very familiar with such as Advocat Inc. (Stock Symbol: AVCA) and Air T Inc. (AIRT). That is the entire point of this exercise after all. It is often very hard to find new stocks to research before buying. We often gravitate to the names that we know like Coca-Cola (KO) or Wal-Mart (WMT). Stock screeners like Google’s are a great tool to help you narrow your choices and focus your limited research time before investing.
Disclaimer: I own shares in Coca-Cola (KO), but everyone should conduct their own research before investing anything in a stock.