A very common problem faced by all new investors is “How to get stock ideas”. There are thousands of companies, we can’t read the financial statements of all to filter out the better ones.
Screener.in is a very useful tool for this stock shortlisting work. In this post, I explain the few steps you can use to screen for high-quality ideas.
Step 1: Visit Screener.in, create a free account, then log into your account, and start creating your first screen. Go to screens and click on create new screen.
You may start with these key numbers (or may add more screening criteria from those available) –
Sales growth 5Years > 10% and
Profit growth 5Years > 10% and
Average return on equity 5Years > 15% and
Average return on capital employed 5Years > 15% and
Debt to equity < 0.5 and Market Capitalization >1000 and
Price to Earning < 25
The Query will look something like this
Running this query will give you the list of companies that have grown their profitability in double digits in the last 5 years. Companies that have low debt and companies that are making at least a 15% return on the capital they are using in the business. Companies that have a market capitalization of 1000 Cr and are not very expensive. The result will be something like below
Notice out of thousands of listed companies you are getting less than 100 companies now.
Step 2: From the list of companies you get, exclude those outside your circle of competence – businesses you “know” you don’t understand. Like if you don’t understand Pharma business, remove the pharma companies from the list.
Step 3: Study your further shortlisted companies. Study their Annual reports, Concall presentations. Know what kind of growth guidance the management is giving.
Step 4: After studying the fundamentals make the final buy Watchlist.
If you are confident of the business prospectous. You can invest in them when Mr. gives you the right opportunity.
Abhishek is an Engineer MBA in Finance and Certified Research Analyst. He is an active trader and investor in the stock market since 2010. Follower of the philosophies of Warren Buffet and Peter Lynch in investing and trend following in trading.