Tuesday, December 14, 2021

Screener logic

Now that I've built up a habit of updating and reviewing my screener each week, I've also started to consider some of the sectors where the quality of holdings could have improved. 

As a reminder, my screener combines data from a variety of sources to assess the ranking. The higher the number (max 25), the better the potential for a higher overall return, dividend growth, and dividend safety.

The primary drivers of the score are:

  • Stock Rover Growth Score (Growth score looks at the 5 year history and also the forward estimates for EBITDA, Sales, and EPS growth to rank the best companies across all stocks with adequate data. The best companies score a 100 and the worst score a 0.)
  • Stock Rover Quality Score (Quality score compares profitability and balance sheet metrics to find high quality companies. Our computation includes ROIC, Net Margin, Gross Margin, Interest Coverage, and Debt / Equity ratio values. The best companies score a 100 and the worst score a 0.
  • SimpliSafe Dividends Safety Score (How safe is the dividend?  Will it be cut?)
  • Economic Moat (This is popularized by Morningstar and shows how much of a protective moat a company has. Usually characterized by companies with high ROE)
  • Schwab Rating - A-F based on a combination of Growth, Quality, Sentiment, Stability and Valuation. I use this as a second opinion.  
I start with a wide filter from Stock Rover, then I filter a step further looking for companies with 4+ years of consecutive dividend growth and have a Simplisafe rating. Based on that, I have ~476 equities to choose from, all varying degrees of quality. If you look at the chart below, historically the companies with a higher score tend to perform better than companies with a lower score.  Therefore, I'll try to maintain a higher ratio of higher scoring stocks in the portfolio. This now becomes my starting point for analysis as I research companies and start looking for undervalued stocks to rebalance or reinvest dividends.


As I started doing research on my own portfolio management two months ago, the most challenging aspect was choosing what to incorporate into my review process. There are so many tools and experts available, at a certain point you need to pick what feels comfortable to you, and everything else becomes noise. 

While I am no expert, I feel very comfortable with the my process and will be updating the portfolio and changes here as they happen.

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