The Web User's Guide To Screening StocksRobert Barker and Dean Foust
John Lah loves numbers. The chief financial officer at a Charlottesville (Va.) health-care company by day, Lah dives right back into vast pools of numbers at night, searching for stock picks. He pays $29.95 monthly to Telescan, a dial-up data service that allows his personal computer to look for undervalued stocks by combing through an assortment of financial ratios. But lately, Lah is finding much of the same information on the Internet--and many of the stock-screening sites are free. "It's just incredible," says Lah, who already has invested in five stocks he found via the Net. "People don't realize how much all this stuff used to cost."
A year ago, you couldn't perform database searches for stocks on the Web at all. But today, at least 15 stock-screening sites are beckoning (table). For individuals armed with a pc and modem, these sites offer an inexpensive way to sift through a universe of stocks to isolate the few that meet particular criteria. For example, you can search for financially strong, small-company stocks showing upward price momentum, yet trading at below-market price-earnings ratios.
CD COUSINS. The stocks selected by these screens aren't guaranteed to rise in price, of course. And even the best databases sometimes yield "dirty" results--information a computer says is fine but common sense knows to be inaccurate. One database, Wall Street City, listed Brooklyn Union Gas, a huge utility, as a microcap stock. But as Ed Scheytt, a Bennington (Vt.) plant manager and longtime amateur investor notes, screening by computer lets you rapidly "prune down to a short list"--the better to focus your research on a few stocks and to delve into them more deeply. Some sites even let you screen for mutual funds.
You can also get screening software offered on cd-rom or floppy disk from companies such as Morningstar (800 735-0700) and Value Line (800 535-9648). These services let you set your own criteria, making them more powerful than their Web cousins. But they can cost as much as $995 annually, and many programs are updated weekly, at best. In contrast, most screening sites are updated daily with closing prices.
Sound good? It is, except for the problem of picking through all the Web's new stock-screening opportunities. That's why we set out to tour the sites and guide you toward the best. While most are free or offer a scaled-down version gratis, what you get at some spots is clearly better than at others.
The spectrum runs from simple sites best for beginners to complex ones geared to advanced amateurs. At the simplest and most straightforward end is Standard & Poor's Corp., which does all the work for you. s&p (like business week, a unit of The McGraw-Hill Companies) runs its 10,000-stock universe through six preset screens each week, rotating them over five weeks through a total of 30 screens before starting over again. They include searches for stocks showing steady profit and dividend increases or high yields with low p-e ratios. s&p, which offers the screens as a stand-alone service for $7.95 monthly, aims by yearend to fold them into a $9.95-a-month site called Personal Wealth that will feature market commentaries and help investors with financial planning.
A bit more complicated--yet more flexible--are such free services as AlphaChart, MarketGuide, MarketPlayer, Morningstar.Net, researchmag. com, StockTools, and Quicken networth. Some are easier to use than others, but each lets you set your own criteria. Most of these free services carry advertising or want you to buy additional data from them. The trick is to locate the site offering criteria you care about.
Do you think it's important that managers have an incentive to see their company's stock soar? At Quicken's site, you can search the Disclosure Inc. database of Securities & Exchange Commission filings for corporations with high levels of stock held by insiders. Are you fascinated by technical analysis? Check out AlphaChart, which tracks such exotica as the Chaikin oscillator, an indicator of stock-price strength, or Bollinger bands, a way of defining a stock's price trend. If it's Canadian stocks you want, try StockTools. Do you wonder how the group of stocks your screen produces will perform in the market together? At researchmag.com, you can create a stock portfolio from your screens and compare its composite characteristics, such as p-e ratio or price change over the past year, with an index, such as the Dow Jones industrials.
The free site with the best mix of sophistication and user-friendliness is Hoover's StockScreener. Easy to understand and fast, StockScreener offers a good variety of variables, plus a way to click on each for a description of how it's computed. The stock prices used in its calculations are updated daily by Hoover's partner, Media General Financial Services.
StockScreener's standout feature is its presentation of results in spreadsheet format, allowing you to sort and re-sort stocks in ascending or descending order of any criterion--say, stocks with the biggest market values first, or lowest profits last.
StockScreener's worst flaw: You can't download the results into your own spreadsheet. To do that, you have to go to www.xls.com, operated by another partner, and pay $2.50 per company sorted by your screen. That's helpful, but it can get costly if you download spreadsheets for 25 companies. Another option is Wall Street Research Net, where a near-clone of StockScreener lets results go into spreadsheets.
To test StockScreener, we tried a simple search for companies of reasonable size (market value of at least $200 million with last 12 months' sales of $400 million or more); that aren't too pricey (p-e ratio of 10 or less); that pay a better-than-market dividend (at least 2% yield); that have a decent balance sheet (debt not more than 33% of equity); and whose margins are expanding. This screen left five stocks: Barclays (a bank), Entergy (a utility), Ford (an auto maker), and Plum Creek Timber and Sun Energy Partners (master limited partnerships). Each is a solid target for further research.
Gordon Gustafson, a motion-picture production coordinator in Los Angeles who has been screening on the Web for eight months, has found several stocks via StockScreener, his favorite site. "It allows me to pinpoint exactly the criteria I want," he says, "and from there I'll go into edgar and read the 10-Qs and such." (edgar is the sec's Web site for corporate filings.)
"BEST-FIT MATCHES." If paying $9.95 a month doesn't deter you, an even better service can be found at Microsoft Investor. Its Investment Finder function screens through the same Media General universe of companies found at Hoover's StockScreener, but it boasts 81 variables--nearly four times the number. Microsoft Investor also proved quite easy to operate, presenting a menu with 12 categories of criteria. Click on one, and an adjacent box pops up to show you the choices in that category. For instance, click "management efficiency" and the second box offers you five choices: revenue per employee, income per employee, receivables turnover, inventory turnover, and asset turnover. When you run a screen, Microsoft Investor only shows the 25 "Best-Fit Matches" that meet your criteria, though at the bottom of the list you'll find a link that lets you see the 200 best fits.
At the same monthly rate, Thomson Investors Network suffers from its way of organizing screening criteria around relative, not absolute, measures. For example, in almost all cases you can't screen by an absolute criterion, such as "more than $400 million in revenues." Instead, you are limited to four relative measures for each variable, such as top 20% in revenues, top 20%-50%, and so on. Thomson says it's working to improve its screens.
In addition to a nifty, if limited, free screening feature, iq Net offers an $18.95-per-month subscription service called iq Suite that mixes 100 technical and fundamental variables. To use it, you need a Java-enabled Web browser, and you have to download three megabytes of software. That allows more computer-literate investors to address their own queries to the database, such as "high >= max125 and volume >= 5*mav40." Those queries would find stocks at a closing price higher than any over the past 125 days and whose volume today is at least five times normal.
Still undaunted? Try Telescan's own entry on the Web, Wall Street City, which taps the same data base but operates more slowly than the dial-up service. Its free stock-screening function is fairly limited, but if you pay the $34.95 monthly for the full ProSearch service you'll find a virtual wonderland of stock-market data.
There's plenty here for the most avaricious number crunchers (even those with a yen for overseas stocks, data on which comes at a $10 monthly surcharge). Among the site's many variables are no fewer than 27 different ways of looking at earnings per share, and for each of those you can screen in either absolute or relative modes. No complex programming commands are required.
Neophytes will be stopped cold by the wide choices at Wall Street City. But at least they'll know where to go if ever they turn into a true numbers junkie like John Lah, for whom screening is a nightly ritual.