Reading time: 4 – 6 minutes
The Google Finance stock screener is a good place to start in selecting stocks for your portfolio.
As of August 2010, the Google Finance stock screener covered about 7,000 stocks on the NYSE, the AMEX, and NASDAQ. The screener has about fifty selection criteria, each with a high-low limit, plus selection by 12 economic sectors and 3 trading markets.
The Google stock screener has five advantages that distinguish it from some competing screens:
- Numerical criteria: Exact numerical criteria may be set. Some screens only allow fixed criteria, such as “more than 5%” or “more than $100 million”.
- Minimum/maximum criteria: Most selection criteria have minimum and maximum numerical values. In many instances, minimum and maximum criteria have different connotations. For example, dividend yields above a certain level, generally have a negative connotation, suggesting an extremely low stock price, or expectations that the yield will not continue.
- Graph of criteria distribution: For each criteria, a bar graph is displayed, showing how the criteria values are distributed across the universe of stocks in the system. This provides better understanding of the meaning of certain criteria, as well as the general characteristics of the market. For example, the Google stock screener allows you to see n an instant the distribution of dividend yields in the utilities sector.
- No automatic transfer to a portfolio: Some stock screeners allow automatic transfer of the results of a stock screen to a portfolio. In the Google screener, this is not possible. It is necessary to manually transfer each stock from the screen to a portfolio. Some investors regard this as lack of automatic dumping of stock screens into portfolios as a disadvantage. I would say the opposite. Computerized stock screens provide only a crude, initial selection of stocks. Usually, many stocks selected by a computer screen can be immediately eliminated by even a cursory examination of the stock report. By forcing this manual selection in setting up a research portfolio, the Google screener imposes better discipline on the screening process. (Nevertheless, screens can be saved by book marking in your browser).
- Close integration of Google Finance: The excellent stock research platform provided by Google Finance is well integrated into the stock screener. This allows you to go quite deeply into your research project, without having to leave the Google Finance site, with so much information available close at hand.
The video clip on this page provides a detailed explanation of how to use the Google stock screener.
General tips on stock screening
Computerized stock screens provide a rough preliminary selection of stocks for further research. The criteria used for a particular screen will depend on your investment objective. The tricks used in stock screening for specific investment purposes will be the subject of future articles.
Google Finance: How to use the stock screener.
Generally, you should think of stock selection as a three step process:
- A computerized screen of a wide universe of stocks, seeking to narrow down the number of stocks for in depth research. For example, an investor seeking dividend yield, need not research stocks paying no dividends.
- A manual selection of stocks from a computer screening, to eliminate stocks not worth further research. For example, is seeking dividend paying stock, a computer screen may present a stock with a high dividend yield, but a quick look at the stock report will show that the company does not regularly pay dividends and that the high yield is unlikely to be repeated next year.
- A full scale, due diligence investigation, leading up to a decision to accept of reject a stock for your portfolio.
Usually, you will use only three or four criteria in your computerized stock screen. Too many criteria will eliminate many stocks that otherwise might be good investments. You can’t find the perfect stock using a computerized stock screen. Careful, manual research is always necessary.
Because of the limitations of computerized screening, you should always think of screening as combining a rough computerized selection with a cursory manual examination, with the aim of developing a list of candidates for in depth, due diligence research.