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Your Next Great Stock: How to Screen the Market for Tomorrow's Top Performers

Book Description

A comprehensive look at how to profit from the power of stock screening

With thousands of stocks to choose from, how can you find the best ones to invest in? Simple: start with a handful of clues that tend to predict outstanding returns, and then search the entire market in seconds for stocks that are producing those clues. That's stock screening, and it's the best way—the only way, really—to consistently beat the market.

Written by experienced investment journalist Jack Hough, Your Next Great Stock reveals the most powerful screen strategies ever produced. The strategies are easy to follow. If you have Internet access and can balance a checkbook, you can find winning stocks with this book as your guide. You'll learn how to find young companies poised for explosive growth, mature companies whose true profit potential is temporarily hidden, and more. Stop relying on overrated stock tips. Start using proven screening strategies to find your next great stock.

Table of Contents

  1. Coypyright
  2. Introduction
  3. 1. YOUR NEXT GREAT STOCK
  4. 1. You Should Own Stocks
  5. 2. You Can Beat the Stock Market
    1. 2.1. Why Stock Picking Isn't Supposed to Work
      1. 2.1.1. Molecules and Markets
      2. 2.1.2. Lousy Stock Pickers
    2. 2.2. The Perfect Portfolio
    3. 2.3. The Stock Pricer
    4. 2.4. Efficient Markets
    5. 2.5. Chimps and Darts
    6. 2.6. Why Stock Picking Does Work
    7. 2.7. The First Good Clues
    8. 2.8. The New Stock Pricer
    9. 2.9. More Good Clues
    10. 2.10. Stock Picking Survives
  6. 3. If Stock Picking Strategies Work, Why Haven't They Been Used Up?
    1. 3.1. Nutty Behavior
      1. 3.1.1. Anchoring
      2. 3.1.2. Representativeness
      3. 3.1.3. Gambler's Fallacy
      4. 3.1.4. Herd Behavior
      5. 3.1.5. Overconfidence
      6. 3.1.6. Risk Aversion
    2. 3.2. Why We Do Strange Things
      1. 3.2.1. We're Not Always Greedy
      2. 3.2.2. Sometimes We Don't See So Well
  7. 4. Stock Screening Is the Best Way to Find Great Stocks
    1. 4.1. 400-Year-Old Technology
    2. 4.2. New and Vastly Improved
      1. 4.2.1. More Challenging
      2. 4.2.2. But Easier, Really
      3. 4.2.3. It's Like Online Dating
    3. 4.3. The Alternatives Are Lousy
      1. 4.3.1. Mutual Fund Managers
    4. 4.4. Wall Street Analysts
    5. 4.5. Stockbrokers
      1. 4.5.1. Consultants
      2. 4.5.2. Phone Reps
      3. 4.5.3. Pundits
    6. 4.6. Company Bosses
    7. 4.7. Friends and Relatives
    8. 4.8. Besides, You're Probably Already Screening
  8. 5. The Rewards Outweigh the Risks
    1. 5.1. Capital Risk
    2. 5.2. Liquidity Risk
    3. 5.3. Currency Risk
    4. 5.4. Inflationary Risk
    5. 5.5. Too-Old-to-Enjoy-It Risk
  9. 6. Telling Great Screening Strategies from Not-So-Great Ones
    1. 6.1. The Pitch
    2. 6.2. Past Returns Sometimes Lie
      1. 6.2.1. Self-Fulfilling Prophecy
      2. 6.2.2. Survivorship Bias
      3. 6.2.3. Data Mining
    3. 6.3. Five Signs of a Winning Strategy
      1. 6.3.1. Correlation and Cause
      2. 6.3.2. Lurking Variables
      3. 6.3.3. Practicality
      4. 6.3.4. Screenability
    4. 6.4. Other Not-So-Proven Strategies
      1. 6.4.1. Football Follies
      2. 6.4.2. Bengali Butter
      3. 6.4.3. Short Skirts
      4. 6.4.4. Headaches
      5. 6.4.5. Makeup
      6. 6.4.6. Elections
  10. 2. TOOLS AND CLUES
  11. 7. How to Use a Screening Tool
    1. 7.1. The Three Parts of Any Clue
      1. 7.1.1. The Variable
      2. 7.1.2. The Relationship
      3. 7.1.3. Value
    2. 7.2. Comparative Clues
    3. 7.3. Formula Builder
    4. 7.4. More than One Solution
    5. 7.5. Clue Order
      1. 7.5.1. Start with the Must-Haves
      2. 7.5.2. Add the Main Themes
      3. 7.5.3. End with the Nice-to-Haves
    6. 7.6. Saving Recipes, Presaved Recipes
    7. 7.7. Running the Screen
    8. 7.8. Fiddling with the Results
    9. 7.9. There's More
  12. 8. The Screeners
    1. 8.1. Screeners that (Mostly) Deliver
      1. 8.1.1. American Association of Individual Investors ($21 a Month)
      2. 8.1.2. AOL Money and Finance (Free)
      3. 8.1.3. Marketwatch (Free)
      4. 8.1.4. Morningstar (Free or $15.95 a month, Free Two-Week Trial)
      5. 8.1.5. MSN Money (Free)
      6. 8.1.6. SmartMoney.com ($5.95 a Month, Free Two-Week Trial)
      7. 8.1.7. Validea ($29.95 a Month)
      8. 8.1.8. Yahoo Finance (Free or $13.95 a Month, Free 30-Day Trial)
      9. 8.1.9. Zacks Investment Research (Free or $24.95 a Month, Free Two-Week Trial)
    2. 8.2. Best Screeners
      1. 8.2.1. Top Free Screener: MSN
      2. 8.2.2. Top Almost-Free Screener: SmartMoney.com
      3. 8.2.3. Top Not-Nearly-Free Screeners: AAII, Zacks
  13. 9. Where the Numbers Come From
    1. 9.1. Source 1: Companies
      1. 9.1.1. Income Statement
      2. 9.1.2. Balance Sheet
      3. 9.1.3. Cash Flow Statement
    2. 9.2. Source 2: Exchanges
    3. 9.3. Source 3: Analysts
  14. 10. Things You Can Screen For
    1. 10.1. Company Descriptions
      1. 10.1.1. Ticker Symbol
      2. 10.1.2. Country of Domicile
      3. 10.1.3. Sector
      4. 10.1.4. Industry
      5. 10.1.5. ADR Indicator
      6. 10.1.6. Index Membership
      7. 10.1.7. Number of Employees
      8. 10.1.8. Analyst
      9. 10.1.9. Auditor Opinion
    2. 10.2. Share-Level Attributes
      1. 10.2.1. Share Price
      2. 10.2.2. 52-Week High/Low Price
      3. 10.2.3. Beta
      4. 10.2.4. Average Volume
      5. 10.2.5. Outstanding Shares
      6. 10.2.6. Diluted Shares Outstanding
      7. 10.2.7. Float
      8. 10.2.8. Market Capitalization
      9. 10.2.9. Enterprise Value
      10. 10.2.10. Dividend Rate
      11. 10.2.11. Dividend Yield
      12. 10.2.12. Payout Percentage
    3. 10.3. Profitable Companies
      1. 10.3.1. Gross Margin
      2. 10.3.2. Operating Margin
      3. 10.3.3. Net Margin
      4. 10.3.4. SGA/Sales
    4. 10.4. Growing Companies
      1. 10.4.1. Sales Growth
      2. 10.4.2. Earnings Growth
    5. 10.5. Well-Managed Companies
      1. 10.5.1. Return on Equity
      2. 10.5.2. Return on Assets
      3. 10.5.3. Return on Invested Capital
      4. 10.5.4. Receivables Ratio
      5. 10.5.5. Inventory Turnover
      6. 10.5.6. Asset Turnover
    6. 10.6. Financially Strong Companies
      1. 10.6.1. Debt/Equity
      2. 10.6.2. Debt/Capital
      3. 10.6.3. Debt Service Coverage Ratio
      4. 10.6.4. Interest Coverage Ratio
      5. 10.6.5. Current Ratio
      6. 10.6.6. Quick Ratio
      7. 10.6.7. Cash Ratio
    7. 10.7. Cheap Companies
      1. 10.7.1. Price/Sales
      2. 10.7.2. Price/Earnings
      3. 10.7.3. PEG Ratio
      4. 10.7.4. Price/Free-Cash-Flow
      5. 10.7.5. EV/EBITDA
      6. 10.7.6. Price/Book Value
    8. 10.8. Popular Companies
      1. 10.8.1. Price Change
      2. 10.8.2. Insider Buying/Ownership
      3. 10.8.3. Institutional Buying/Ownership
      4. 10.8.4. Change in Short Interest
      5. 10.8.5. Short Interest Ratio
      6. 10.8.6. Average Analyst Recommendation/Change in Recommendation
      7. 10.8.7. Analyst Forecasts
  15. 3. STRATEGIES
  16. 11. How to Use the Strategies
    1. 11.1. Growth Screens versus Value Screens
    2. 11.2. Faithfulness Is Overrated
    3. 11.3. Feel Free to Tinker
  17. 12. The Buy High, Sell Higher Screen
    1. 12.1. Buy High, Sell Higher Screen Recipe
  18. 13. The Impatient Value Screen
    1. 13.1. Impatient Value Screen Recipe
  19. 14. The Surprise, Surprise Screen
    1. 14.1. Surprise, Surprise Screen Recipe
  20. 15. The Tomorrow's Breakthrough Screen
    1. 15.1. Tomorrow's Breakthrough Screen Recipe
  21. 16. The New Dogs Screen
  22. 17. The Bold Is Beautiful Screen
    1. 17.1. The Bold Is Beautiful Screen Recipe
  23. 18. The Rising Expectations Screen
  24. 19. The Follow the Leaders Screen
    1. 19.1. Follow the Leaders Screen Recipe
  25. 20. The Accrual to Be Kind Screen
    1. 20.1. The Accrual to Be Kind Screen Recipe
  26. 21. The Sales on Sale Screen
    1. 21.1. The Sales on Sale Screen Recipe
  27. 22. The Combination Platter Screen
    1. 22.1. The Combination Platter Screen Recipe
  28. 23. Guru Screens
    1. 23.1. Warren Buffett
    2. 23.2. Peter Lynch
    3. 23.3. William O'Neil
    4. 23.4. Martin Zweig
  29. 4. YOUR NEXT GREAT STOCK, REVISITED
  30. 24. Which Screen Survivors to Buy
    1. 24.1. Deal Breakers
    2. 24.2. Get to Know Your Screen Survivors
    3. 24.3. Talk Yourself Out of It
      1. 24.3.1. Cheap and Growing
      2. 24.3.2. Strong
      3. 24.3.3. Well Managed
  31. 25. When to Sell