What Is Stock Screener? How It Helps To Select The Right Stocks?
Read this blog to know how Stock Screener helps investors to select the right stocks.
The ‘Stock Screeners’ are tools which help sift through the thousands of stocks and find the one for you. Once you add simple parameters like price per share, earnings etc, the scrips that pass through these filters become a part of the list i.e. the final result. If you want to see shares in a particular price range between say, Rs.350 – Rs 500, you can set the price filter and it will show all the scrips belonging in that range. Think of it like a filter tool available on shopping website to allow you to buy the product that you are really looking except ‘Stock Screeners’ are for shares.
Basically, stocks screeners are tools, it will exactly find what you are looking for and you should know what you would really like. They act as a preliminary step for research for anyone looking to dive deeper into the analysis. It makes searching stocks real easy, let’s look at some benefits,
Like most topics we publish, stock screeners are more important with penny stocks than they are with conventional investments. This is because there are about 18,000 penny stocks, and most of them are low-quality companies which can be easily taken out of the picture by using a simple screen.
From the thousands of scrips available it is easy to weed out say, ‘penny stocks’ if you are not interested in them.
There are numerous parameters available to get more refined results like, price per share, dividend rates, profit margin and many others like,
- Exchange and Markets the Scrip trades on
- Current share price
- Sector / Industry
- Profit margins
- Financial ratios
- Growth rate
- Trading volume
- % of year high/low
A common interpretation by most investors is to use stock screener to find potential investments, however, as a tool stock screener are useful for eliminating undesirables so you finally have the ones you would like to know more about.
Stock screeners are certainly useful for the stocks that you want to buy for your own, infact if you pay a professional to do that for it is likely they will use the stock screener too.
Remember, performing a stock screen is NOT:
Using a stock screener looking for a stock does not mean ,
- That you are doing due diligence
- You are effectively researching the underlying companies
- Or are finding or generating accurate information
Do be careful of the pre-set screens in a stock screener. A lot of free ones and online stock screener promote some pre-set screens like ‘Rapid Growth’, now from experience these are purely for promotion of some underlying scrip than finding really good scrip.
Now, a lot of this depends on the parameters inserted for screening so they vary according to market returns. So, these stock screeners or the whole process of screening should be seen as a first step to finding potential companies not a list of share to buy.
Many stock screeners have loopholes and are unable to display accurate information. You should go for the stock screener provided by a full – service brokerage firm so their reputation is on the line. They cannot afford to mess it up with inaccurate information. So go for the stock screener provided by your broker or a full-service broker.
Lastly, stock screener is a great and necessary tool for finding great companies and is very helpful. Use the screener to direct you in the right direction and then you can do your own research and hard work on the analysis to find the right investment for you.