Making money in the stock market starts with finding a fundamentally strong company. Searching for a good company from thousands of listed companies is a challenging task. The huge amount of data on the internet doesn’t make things any easier. Moreover, segregating actionable information from huge stacks of data is also difficult.
A stock screener can help investor to save time and energy by narrowing the scope of research to a convenient number. Investor can spot the right opportunity by filtering large chunk of datasets based on his preferences and strategy.
Screeners are easy to use tool provided you know what criteria to search for. If you don’t know which conditions should be applied on what domain then they are of little use. Understanding this need, Heckyl has come out with pre-defined screeners, which provides option to play on well-known themes, investment strategies and renowned gurus investing mantras.
Heckyl’s research team has handpicked screeners after years of experience in research and querying historical data to arrive at modelled screeners. Some of our top performing screeners are free cash flow cows; dogs of index; high growth high ROE and low P/E; loss to profit companies; and financial healthy large cap stocks.
To measure the performance, Heckyl has prepared index for each screener. Index assigns appropriate weightage to stocks filtered by screeners from BSE 500. Our dashboard gives overview of screener index performance in charts along with returns delivered in the last one month. User can view list of stocks filtered by screeners by expanding screener widget from dashboard.
Seven out of our nine pre-defined stock screeners have outperformed the broad based Nifty in the past six months. Our free cash flow cows and dogs of index screeners have outperformed the Nifty over 1-month, 3-months and 6-months. Below charts show performance of our screeners in comparison with the Nifty.
Dogs of Index
Dogs of index scouts for companies with high dividend yield and reasonable valuations. Stocks in this category are suitable for investors seeking regular income. This screener shortlists companies whose dividend yield is greater than 2 and price to equity (P/E) ratio is below industry average.
One such stock which featured in our dogs of index screener is NMDC. The dividend yield of the state-run mineral producer was at 8.39 percent, which is close to bank deposit rates. Dividend yield is computed as dividend payment as a percentage of share price. The stock is also available at cheap valuation. The stock was quoted at Rs 101.95 on April 8, i.e. 10.6 times (P/E) of trailing twelve months earnings per share (EPS) of Rs 9.64.
On profitability front, return on assets (ROA) and return on equity (ROE) remained healthy at 15 percent and 20.6 percent respectively. Heckyl’s proprietary Health Score for NMDC improved during the last six months to 50 in March 2016 compared with 46 in September last year. Health Score between 40 and 60 indicates “Very Good” fundamentals on scale of 0 to 100.
Correction in the prices of mineral and its impact on financials weighed the stock price. The stock was beaten down 21.8 percent during the last one year. However, the stock is in recovery mode from the end of February. Since then, stock has staged a strong rally of 25.9 percent. A recovery in the mineral prices is key for improvement in NMDC’s financial health as well as share price performance.
Free Cash Flow Cows
Free cash flow cows screener returns stable and cash rich companies which are growing their free cash flow and available at cheap valuations. This screener mainly looks for companies, which are posting increase in free cash flow on continuous basis for the last 3 years.
Hindustan Petroleum Corporation (HPCL), one of the leading oil marketing companies (OMCs), tops our free cash flow cows’ screener. HPCL’s free cash flow per share was highest among OMCs at Rs 383.2. The dividend yield of the state-run OMC was at 3.1 percent. The stock is available at reasonable valuation. The stock was quoted at Rs 816 on April 8, i.e. 6.2 times (P/E) of twelve trailing months EPS of Rs 132.
On profitability front, ROA was below industry average at 3.8 percent, while, ROE was above industry average at healthy 17.8 percent.
A decline in global oil prices by over 40 percent in 2015 helped the OMCs to improve profitability. The company swung to profit for quarter ended December 2015. Net profit for the quarter stood at Rs 1,042.3 crores on revenues of Rs 43,500 crores.
The stock had a good run during the last one year helped by favorable oil prices. It gained 21.3 percent in a year. Oil prices are expected to remain stable and unlikely to move up sharply due to oversupply in the global markets. So OMCs are expected remain in limelight as the key beneficiary of lower oil prices.
The Bottom Line:
One should remember that screeners are no replacement for an in depth fundamental analysis. Having said that, screeners are a good place to start your research process as they can save time by narrowing your options.
Heckyl’s easy to use nine pre-defined screeners not only helps in identifying market beating ideas but also provides an edge over traditional screeners by letting investors play on well-known themes, investment strategies and renowned gurus investing mantras. So start screening stocks at Heckyl.
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