Given the uncertainties about when and how the
pandemic ends and the status of the economy when that does happen,
there is no way to predict to predict any given company’s sales and
earnings in 2021 or even 2022.
Thus, whether you’re a growth investor or a value
player, traditional stock selection strategies that depend on such
forecasts are useless.
Yet, the stock market couldn’t care less. It just
keeps going up. The S&P 500 gained 5.5% in July and is already up 2%
But, most stocks aren’t participating in this rally.
In fact, according to Forbes Magazine, only about one-third of S&P
500 stocks are up so far this year.
Bottom line, we’re in a momentum market. Stocks that
have already moved up are your best bets for future gains, assuming
that the market stays in rally mode.
Along those lines, in a May tutorial, I described
four such momentum plays that, in my view were ripe for continues
future gains. From May 11 through August 6, those four stocks
averaged a 24% gain compared to the S&P 500’s 14% return.
Encouraged by those numbers, today, I’ll describe how
you could use the free and user-friendly finviz stock screener to
produce your own list when you think the time is right. Also, at the
end, I list the five stocks the screener turned up last Wednesday.
Momentum Stock Screen
Start at the finviz homepage (https:finviz.com),
and then select Screener. Next, click on “All” to see the available
stock selection filters. Then, use the associated dropdown to
specify screening values for the filters that you want to use.
Start by using the Country filter to limit your list
to U.S.-based stocks.
Using the Performance filter, Select “YTD +5%” to
confine your list to stocks that have moved up in price at least
five percent since December 31. Then, specify “Quarter +20%” using
the “Performance 2” filter to isolate the strongest recent
Finally, in this category, specify “Price Above SMA”
using the “20-Day Simple Moving Average” filter (average price over
last 20 trading days) to assure that passing stocks are still
Next, to rule out risky smaller players, use the
Market Cap filter and specify “+Mid” which limits your list to
stocks with market-capitalizations (value of all outstanding shares)
above $2 billion.
Also, because cheap stocks get that way because
market players see problems ahead, use the Price filter to limit
your list to stocks trading above $20 per share.
Follow Smart Money
Institutional buyers such as mutual funds have access
to information that we’ll never see. Require “over 30%”
Institutional Ownership to assure that these “wired in” players hold
at least 30% of outstanding shares.
In a similar vein, specify “Over +5%” for Insider
Transactions to assure that company executives, board members, and
big shareholders are buying, not selling.
Ready to Run Screen
Here’s a link to the screen
so that you can run it yourself:
Five Stocks Passed
Here are the five stocks that passed these tests for
me: when I ran it
after the bell August 6. Artesian Partners Asset Management (APAM),
Clearway Energy (CWEN), Innovative Industrial Properties (IIPR),
Overstock.com (OSTK, and TriNet Group (TNET).
Momentum plays work well
until they don’t. Sell on any bad news such as big earnings or
revenue miss, multiple analyst downgrades, etc.