Investors, behold. HERE, in the guise of a simple software package, is your miracle. For expert and novice alike, it’s something akin to the tablets delivered on Mount Sinai and the gift of fire rolled into one: the stock screen.
Sound like hype? Don’t laugh. Stock screening programs, readily available in a variety of places on the Internet, do a lot to live up to that billing. Start with the fact that they provide the same tools professionals use. Ever since computers were harnessed to the task of choosing investments, portfolio managers have used screens to sift through mountains of stock market data to unearth the best shares.
It’s not the breadth of information alone that makes stock screens so special. A sizable portion of their beauty lies in speed. Generally speaking, counting the amount of time it takes to log on, you’ll spend only five to 10 minutes to input a set of orders and collect a list of stocks. That means it’s now possible to tailor a portfolio to fit your needs, risk tolerance and future plans in one sitting. Better yet, you needn’t have a degree in computer engineering or great investing expertise to get started. And, if you’re not won over yet, consider the price of the advice in many cases–it’s free!
What exactly is a stock screen? You probably remember seeing movies depicting crusty old prospectors panning mountain streams in search of gold. They’d dip into the river’s silt, swirl the mud and water about a bit, skim the contents and collect the shiniest rocks. A stock screen works much like the prospector’s pan. Its software scoops up data on thousands of stocks that trade publicly on the New York Stock Exchange, American Stock Exchange and the Nasdaq. Next, it sifts through the numbers according to requirements or criteria you plug in, discarding the companies that don’t meet your goals. For example, if you’re looking for corporations that are growing earnings at 20% or more a year yet are trading at a price-to-earnings multiple (P/E) of 30 or less, a screen will ferret out a list of candidates for your researching pleasure.
That’s a marked break with the past. Not that long ago, the average individual investor’s stock-picking efforts were a hit-or-miss venture. Choosing a company you’d invest in amounted to wading through mounds of prospectuses, scanning an infinite array of numbers or just dumb luck based on a tip from a friend. Shelling out extra money in trading commissions, might get you a few recommendations from your broker.
If stock screens are uncharted territory for you, don’t fret. We’ve scouted the Net for places to go. Even if you’re well versed in screening capabilities, we’ve not only provided a list of things to look for, but a few ideas to get you started.
Let’s start with the screens themselves, which can be found at a number of good sites on the Web. We suggest two things as you start off: keep it simple and make sure it’s free.