Nancy IsaacsNAIC Forum - Long term investing made simplehttp://community.compuserve.com/naic
For the Sector and Industry Screening workshop, we will be making virtual visits and references to several web sites during the workshop. The sites are Morningstar, CBS MarketWatch, Reuters (was Multex), MSN Money Central and SmartMoney. The portions of these web sites that we’ll surf are free. However, two of them, Morningstar and Reuters, require registration, so you may want to do that now before the workshop begins.
See you all on Tuesday when the Sector and Industry Screening workshop begins.
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Saul…
Nancy CraysNAIC Forum - Long term investing made simpleClick on the Forum name to visit us
Saul,
I am hanging on your every word. I have to mention that your writing style is just wonderful, so clear and understandable. It's really a pleasure to read.
>>Companies listed in Phil’s Growth Screen “…must meet four tests: They are projected by Value Line to double earnings in the next five years, have actually doubled earnings in the past five years, are selling at price-earnings multiples (P/Es) that are 110 percent or less of Value Line's projected earnings growth rate, and have safety ratings of average or better.” <<
You refer to safety ratings as does Phil Keating. But the spreadsheet shows the Financial Strength rating. By safety rating are you and Phil referring the FS of B+ or better, or are you referring to the safety rating (upper left of the VL sheet) even though there isn't a column for safety?
>>The second such pre-digested stock screen is found on the inside back cover of the Summary and Index, Part 1 of each week’s issue of Value Line reports, Standard Edition. I have found several terrific companies listed there and presently own 11 of the 100 stocks that are currently listed. In order to make this list, a company’s annual sales growth, cash flow, eps, dividends and book value must together have averaged 11% or more (I like the “or more” part!) over the past 10 years and be expected to do the same over the next 3 to 5 years.<<
I'm just curious - how is a non-dividend-paying stock get treated? Is it counted as zero % growth, thus bringing down the average, or are dividends excluded from the calculation where they'd then average sales, cash flow, eps and book value?
Also, on the VL Highest Growth Stocks screen, do you pay attention to the Industry Rank on the right?
>>Another reason to sift through sector and industry data is that of diversification. We can use the sector and industry data to find companies in specific industries and of different sizes that meet our diversification needs.<<
Are you simply suggesting that we choose companies (from the Keating and VL screens discussed above) that are in industries and sectors in which we are not already overweighted? Or are you talking about a different type of screen?
>>In addition, we can readily obtain performance and competitive information for companies of interest while we’re still online; actually, while we’re still in the sector or industry database by simply clicking a little deeper into the data. <<
Huh? Or is this something you'll be getting into on a subsequent post?
And one final question: Phil's screen has about 50 companies and VL's has 100. I'm sure there's a lot of duplication, but what is your process? Do you import each company (other than the ones with which you're already familiar) to at least view the visual analysis, or do you have a system for narrowing down the list.
I really apologize for all the questions, but I've been terribly negligent when it comes to screening. I haven't been paying attention to either of these lists which are obviously easy to obtain. I am, therefore, hoping (with your direction) to mend my ways <g>
>>As far as watching price points, I update the prices every day I'm here at the computer.<<
Lowell,
Can you be a bit specific? Do you have SSG's in TK for all of those stocks? And if so, what do you do once you've updated the prices? Do you look at the Summary for buy candidates? Or are you doing all of this outside of TK. I know that you maintain a large spreadsheet with all sorts of criteria, but I'm interested specifically in what you do once you've updated the prices. I doubt you manually update your spreadsheet to reflect the change in valuation. Or do you?
>>And one final question: Phil's screen has about 50 companies and VL's has 100. I'm sure there's a lot of duplication, but what is your process? Do you import each company (other than the ones with which you're already familiar) to at least view the visual analysis, or do you have a system for narrowing down the list.<<
Oops, I asked this question before reading your response to Lowell. No need to repeat your response. But......... say you check out Novellus (NVLS) and decide you don't like the lack on consistency of the historic growth trends. Do you make a note of that somewhere, to save yourself from checking again next time it shows up, or do you just make a mental note? I'm referring to the companies that you consider inappropriate for your watch list.
>>Did I answer your questions?<<
You sure did. I'm hoping to develop a new portfolio with a much larger watchlist, based on these screens, using quick and dirty SSG's and checking the summary in TK. If and when one falls into my buy range or gets near to it, I'll do some serious research to see if I'm really interested. If not, for whatever reason, I'll delete it from the watchlist. This portfolio will not include my existing positions that are fully researched.
I think I'll keep a document which lists rejects and a brief reason why, so that I don't have to keep reinventing the wheel. Of course I'm just thinking outloud right now. I might change what I actually do based on the rest of Saul's presentation and also based on how it all works out in practical terms, time involved, etc.
I'm thinking the process should get easier and easier in time, since as Saul says the screens don't change that much. Thanks for the quickie response.
Using a SS to keep track of watch list automatically make sense. It really helps organizing ones list. Is it too much to ask for a copy of it? I am a programmer and would change it to automate to my liking.
Thank you for all your wonderful support, I am learning a lot here.
Thanks a lot Saul for sharing the ideas and information.
Kishor
Since Phil takes dividend growth into account, I'd say that a non-dividend paying stock suffers a bit in the computation of its overall growth potential. but again, if they make it through the screen, dividend paying or not, that's all I need to know to begin my SSG if I have any preliminary interest in a company. I rely on my SSG to handle adequacy of growth potential.
Nancy, I can't honestly say I don't notice that column from time to time, but I don't seek it out or give it any special weight. As I'll discuss in a later installment on the sector/industry screening done in VL, industry rank there has a different meaning than it does in other industry screens. Don't want to give away the thrilling VL follow-up too early <g>.
I'm taking the simple approach as you indicate. Let's say that an investor or club decides they are light in a particular sector or industry. They only need to go to a screen of that segment and seek out the best companies there for further evaluation. The key here is defining and understanding the criteria by which "best" companies are measured in a sector or industry screen. more on that point in the next installment.
That's the plan <g>. I'll also discuss my ideal screening program in the concluding installment, a program which is not yet available and will probably never be, but it's fun to dream about such capabilities.
I think you caught up to this question in a later post, but I'll repeat my method here for the sake of continuity. For predigested screens in particular, such as VL or Phil Keating's, I only pay attention to PE as a further mental screening step and let the SSG lead the way for the rest of my evaluation effort. I'll do the OPS data import and look at the visual analysis. If that's fairly attractive, I'll go on. If section 1 looks like a train wreck, I move on to the next company. With OPS, that's an easy approach to implement. Without OPS, evaluating the results of a screen is difficult and time consuming, but that's true for doing an SSG for any other reason <g>. OPS rules!
