Guru Stock Screener

Yesterday I shared my favorite free online stock screener, and as usual, my email box was flooded with questions on how to use the stock screener. That's fair, especially if you are new to this game. Obviously, if you don't know anything about how to screen for stocks, even the best stock screener in the world isn't going to help you!

That's why I believe that pre-set guru screens are becoming even more popular and widely used. With a simple click of a mouse, you get candidates that gurus like Benjamin Graham, James P. O'Shaughnessy, Peter Lynch, Ken Fisher, & Martin Zweig find attractive. Several websites, like Validea, have begun to cater to this need. In fact, if you want to try one out for free, here's one guru stock screener.

The funny thing about these stock screeners is that while they look for qualities these gurus may find attractive, even the gurus themselves would not rely on these screens completely. To think otherwise, is to incorrectly believe this game can easily be gamed in such an mundane manner.

Because of my track record, I receive tons of requests for how I run my screens, but the fact of the matter is that I have so many, that I can't simply provide an adequate answer. I wish I could, it would make my job and your job a lot easier. But as I've said many times before, there are no short-cuts to success. Only hard work will get you there.

The way I use these guru screens, and all other stock screens for that matter, is that I'm looking for stocks that are either 1) frequent visitors to my screen results (i.e. stocks that come up frequently in completely different screens I run), and 2) a change in candidates (i.e. sectors and stocks represented that increase or decrease over long periods of time).

Let me explain. In essence, if I run 40 screens today and three stocks continue to come up in those 40 more than any other, I direct my attention to those three. It is not just coincidence that those three are being identified more frequently - it is often because the setup is so impressive that I have to evaluate those positions (technically for trades & fundamentally for long-term holds). In addition, there are many times I see no frequent visitors, which also indicates to me that no low-risk/high-reward opportunities can be found.

Secondly, I run the screens over and over, sometimes weekly, sometimes monthly, and so on. I also keep the results so I can compare and contrast over periods of time. By doing this, I see sector trends early and I identify areas of the market that deserve my full attention. That's how I approach stock screening in general.

Yet another approach and one that takes much more time and skill, is to learn how to successfully tweak these stock screens yourself. This is something I spend a lot of time doing. In essence, a screen that worked well for Peter Lynch ten years ago, simply won't work as well in today's market, so I try to tweak it to produce even better results in today's environment. Sometimes this means eliminating certain parameters, and other times it means adding stuff in. This takes time and practice, but the effort is well spent. If I didn't do that, I'm sure my performance would be subpar. It is the heart of my strategy not only as an investor, but as a trader.

And, finally, a word of caution. No method or strategy will work well in all markets. The gurus who all have remarkable track records would be the first to explain that. This game is an ever-changing challenge, one that will continue to test your abilities and skill. But the good news is that those who work hard, always have the advantage. The market is filled with those who seek easy gains and if you do your homework, you can take advantage of their lack of skill and knowledge.

Or, if you don't want to go that route, just create a lazy investor portfolio - match the S&P 500's returns year over year through cheap exchange-traded-funds, and spend your time and energy on more useful endeavors!