Do you want to find stocks that could potentially
beat the market over the next two years?
While in the stock market, nothing works all of the
time, I’ve found four factors that outperforming stocks often have
in common.
So, in theory, a portfolio of stocks containing all
four factors should beat the market.
With that in mind, today I’m going to describe a
stock screen that you could use to indentify such stocks. It’s
untested, so don’t put serious money there yet. Here
are the details.
Use Finviz Screener
As usual, I’ll use the free and user friendly Finviz
stock screening program to find the stocks.
Start from the Finviz homepage (finviz.com) by
selecting Screener. Finviz uses “filters” to search for stocks
meeting your selection criteria. Select “All” on the Filters bar to
see all of the available filters. Here’s how to set up the screen.
Profitable
Already profitable companies are your best bets for
future share price growth. Finviz offers a variety of different
profitability gauges. I’ve done a lot of testing using return on
equity, which compares net income to shareholders equity. So select
the “Return on Equity” filter and specify “Over +15%” to limit your
list to highly profitable stocks.
Earnings Growth
Forecasts
I’ve found that stock share prices track annual
per-share earnings (EPS) closer than any other single factor.
Analyst’s forecasts are the only tool available to us for predicting
future EPS growth. So, select both the “EPS Growth This Year” and
“EPS Growth Next Year” filters and specify “Over 30%,” which is the
highest available choice, for each.
High Institutional
Ownership
Institutional investors are organizations such as
mutual funds, hedge funds, endowments, etc. I’ve found that stocks
heavily owned by these savvy investors typically outperform stocks
with low institutional ownership. Specify “Over 90%” using the
“Institutional Ownership” to limit your list to stocks in-favor with
these wired-investors.
High Trading Price
Contrary to what many market players seem to believe,
higher priced stocks typically outperform “cheap stocks.” So, using
the “Price” filter, specify “Over $50” to rule out cheap stocks.
Five Candidates
My screen turned up five stocks when I ran it
last week.
•
American International Group (AIG): offers a variety of insurance
products internationally. Expected 2023 year-over-year EPS growth
40%.
•
CONSOL Energy (CEIX): produces and exports bituminous coal in the
U.S. Expected 2023 EPS growth 157%.
•
Darling Ingredients (DAR): Produces products from
waste recycling.
Expected 2023 EPS growth 31%.
•
Expedia Group (EXPE): online
travel agencies. Expected 2023 EPS growth 31%.
•
Incyte Corp. (INCY):
biopharmaceuticals. Expected 2323 EPS growth 46%.
These are my ideas, but do your own due diligence.
The more you know about your stocks, the better your results.
published 1/19/23
