Are you using the right stock screening tools?
5,000+ stocks listed on BSE, but how do you pick the best ones to invest in? Generic stock screening tools may limit your options, negatively impacting your portfolio. In this article, we'll explore how you need a modern solution like Finology Ticker to help you make smarter investment choices.
Find us an investor who'd pass on the opportunity to use an advanced stock screener that's also very easy to use; we'll wait. After all, over 5 lakh investors agree that Finology Ticker has it all!
Screening is an essential step to picking great stocks, a step that can be the difference between profits and losses. Yet, many investors use outdated methods to screen stocks. If you're relying solely on generic financial ratios like P/E, P/B, or RoE for all stocks across sectors, you might be missing the mark.
Think about it: don't you often struggle with:
- Limited historical data
- Sluggish screening interface
- Lack of variety in ratios
Worry not! Upgrade your stock screening methods with Finology Ticker's advanced features and help yourself beat these challenges effortlessly!
3 Common Mistakes in Stock Screening
Yes, stock screening tools can be quite powerful, but it all depends on the effectiveness of the criteria you set. Here are the mistakes investors usually make:
1. Using Generic Parameters Across All Sectors
This is one of the most common mistakes investors make.
For example, the Price-to-Earnings (P/E) ratio is used to determine a stock's correct valuation. However, a high P/E ratio in one industry might be a red flag, while in another, it could be a sign of growth potential.
2. Relying on Outdated Ratios
Another common mistake is relying too much on outdated financial ratios like P/E, P/B, and RoE. While these ratios can be helpful, they don't give the full picture of a company's financial health.
For example, the Price-to-Book (P/B) ratio works well for industries with lots of physical assets, like manufacturing. However, in sectors like IT or services, where intangible assets matter more, the P/B ratio doesn't tell an accurate story.
3. Not Saving Screens for Future
Stock screening isn't something you do just once. Many investors create detailed screens based on their analysis but then forget to save them. So, every time they want to revisit their analysis, they end up rebuilding the entire screen from scratch.
Not only is that a waste of time, but it's also inefficient.
What Modern Screening Should Look Like
The one-size-fits-all approach doesn't work. What else can you try? You need a modern screening tool that offers:
1. Sector Specific Customisation
Every sector has its own set of evaluation metrics. Take the banking sector, for example. It is analysed using:
- Current Account and Savings Account (CASA)
- Net Interest Margin (NIM)
- Net Non-Performing Assets (NNPA)
As screened in the above image using Finology Ticker, these ratios help you understand the bank's performance, profitability and asset quality. However, for the tech industry, a completely different set of ratios is used:
- Return on Equity (ROE)
- Earnings Per Share (EPS) Growth
- Research & Development (R&D) Expenditure
Why? Because tech companies are often growth-oriented and rely on innovation.
With Finology Ticker, you can apply sector-specific parameters and ratios for each industry and get a clearer picture of the company's performance.
2. Historical Data Analysis
You need to look at a company's historical data to get a better understanding of its long-term performance. Finology Ticker makes this easy by showing you metrics like the 5-year Compound Annual Growth Rate (CAGR) for earnings or dividend payout ratios.
These numbers help you identify companies that have shown steady growth over time. This long-term perspective helps you pick stable and reliable stocks.
3. Dynamic Screening Features
A modern screener should help you filter stocks based on fundamental metrics. It should also allow you to dynamically adjust your search criteria. With features like automatic suggestions, you can refine your search based on evolving market trends.
A smart screener might recommend that you use specific ratios based on the search criteria you enter. This dynamic adjustment makes it easier to refine your strategy and stay aligned with market conditions without manually adjusting the filters every time.
How Finology Ticker Can Solve These Problems
To start with, Finology Ticker eliminates the shortcomings of traditional screeners. Here's how:
1. Sector-Specific Parameters
With Ticker, you can customise parameters for different sectors, ensuring that you use sector-relevant evaluation parameters. For instance, you can focus on companies with low debt and stable ROCE while screening FMCG stocks. These indicators are critical in understanding the financial health and operational efficiency of this sector.
2. Backtesting with Historical Data
With Ticker you can enable backtesting. This means you can filter out the stocks that have shown consistent revenue and profit growth over the last 5 years and validate the reliability of your investment strategy. Ultimately, this helps you avoid the mistake of relying on short-term trends or untested assumptions.
3. Saved Screens for Strategy Evolution
With Ticker, you can save, revisit, and refine your strategies as market conditions evolve. Suppose you had created a "High ROE, Low Debt" screen during the bullish market trend. Ticker lets you adapt this strategy for the bear market without having to recreate it from scratch.
4. Sorting for Specific Ratios or Sectors
With Ticker's sorting capabilities, you can organise your stocks based on key attributes like:
- Market capitalisation
- Stock price
- Specific sectors
This means that you can sort by the highest market cap within a chosen sector or search for small-cap stocks in emerging industries.
Key Features Offered by Finology Ticker
Ticker also offers a range of features that would help you improve your stock screening process:
- Historical Data Integration: Understanding past trends is key. With Ticker, you can analyse 5-year revenue growth or consistent profit trends to identify reliable performers.
- Automatic Suggestions: Ticker offers AI-powered screening by suggesting relevant metrics. For example, typing "profit” instantly recommends Net Profit Margin and related ratios.
- Dividend Screening: Looking for regular dividend-paying stocks? Ticker helps you find "Dividend Kings" by filtering stocks with consistent dividend growth.
- FII/DII Trends: Track where Foreign and Domestic Institutional Investors are putting their money to spot promising opportunities. Just type“FII Holding Q1 > 20 AND DII Holding Q1 > 20” on Ticker’s Screener and get the list of stocks in seconds.
- Ease of Use: Ticker's clean, simple interface is perfect for beginners and seasoned investors alike.
- Parameter Definitions and Context: Confused by financial jargon? Ticker explains each parameter in simple terms, making stock screening easy and informed.
Conclusion
Stock screening has come a long way, and it's time to move past outdated methods that don't match today's market complexities. Using the same ratios for every sector? That's like using the same tool for every job— it just doesn't work!
With Finology Ticker, you get a smarter way to screen stocks. Sector-specific filters, historical trends, and insights on FII/DII movements make it super easy to find the right stocks.
Why stick to the old way when a better one's waiting? Check out Finology Ticker today and take your stock screening to the next level!
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