Regarding: "I'm now in a hunt for criteria to try to build some screen that would return potential value candidates that could be suitable for further research", here's what AAII says they use for Graham stocks:
Enterprising:The price-earnings ratio is among the lowest 10% of the database (Percent Rank less than or equal to 10)
The current ratio for the last fiscal quarter (Q1) is greater than or equal to 1.5
The long-term debt-to-working capital ratio for the last fiscal quarter (Q1) is greater than 0% and less than 110%
Earnings per share for each of the last five fiscal years and for the last 12 months have been positive
The company intends to pay a dividend over the next year (indicated dividend is greater than zero)
The company has paid a dividend over the last 12 months
Earnings per share for the last 12 months is greater than the earnings per share from five years ago (Y5)
Earnings per share for the last fiscal year (Y1) is greater than the earnings per share from five years ago (Y5)
The price-to-book ratio is less than or equal to 1.2 Defensive (Utility):Only companies in the utility sector are included
Total assets for the last fiscal quarter (Q1) are greater than or equal to $200 million
The long-term debt-to-equity ratio for the last fiscal quarter (Q1) is less than 200%
Earnings per share for the last seven fiscal years and for the last 12 months have been positive
The seven-year growth rate in earnings per share is greater than 3%
The company intends to pay a dividend over the next year (indicated dividend is greater than zero)
The company has paid a dividend over the last 12 months as well as each of the last seven fiscal years
The price-earnings ratio, using an average of earnings per share for the last three years, is less than or equal to 17
As interest rates rise (fall), the price-earnings ratios fall (increase) because future earnings are worth less (more) to investors today when discount rates rise (fall). Therefore, we adjust the maximum price-earnings ratio to reflect changes in the level of market rates, as represented by the 10-year AA corporate bond yield
The product of the current price-earnings ratio multiplied by the price-to-book ratio is less than or equal to 25.5 (the product of the maximum price-earnings ratio, which is currently 17, and the maximum price-to-book ratio of 1.5)
As interest rates rise (fall), the price-earnings ratios fall (increase) because future earnings are worth less (more) to investors today when discount rates rise (fall). Therefore, we adjust the maximum price-earnings ratio to reflect changes in the level of market rates, as represented by the 10-year AA corporate bond yield. This, in turn, impacts the maximum allowable price-earnings ratio multiplied by price-to-book ratio for the screenDefensive (Non-Utility):Those companies that are part of the utilities sector are excluded
Sales over the last 12 months are greater than or equal to $400 million
The current ratio for the last fiscal quarter (Q1) is greater than or equal to 2.0
The long-term debt-to-working capital ratio for the last fiscal quarter (Q1) is greater than 0% and less than 100%
Earnings per share for each of the last seven fiscal years and for the last 12 months are positive
The seven-year growth rate in earnings per share is greater than 3%
The company intends to pay a dividend over the next year (indicated dividend greater than zero)
The company has paid a dividend for each of the last seven fiscal years and over the last 12 months
The price-earnings ratio, using an average of earnings per share for the last three years, is less than or equal to 17
As interest rates rise (fall), the price-earnings ratios fall (increase) because future earnings are worth less (more) to investors today when discount rates rise (fall). Therefore, we adjust the maximum price-earnings ratio to reflect changes in the level of market rates, as represented by the 10-year AA corporate bond yield
The product of the current price-earnings ratio multiplied by the price-to-book ratio is less than or equal to 25.5 (the product of the maximum price-earnings ratio, which is currently 17, and the maximum price-to-book ratio of 1.5)
As interest rates rise (fall), the price-earnings ratios fall (increase) because future earnings are worth less (more) to investors today when discount rates rise (fall). Therefore, we adjust the maximum price-earnings ratio to reflect changes in the level of market rates, as represented by the 10-year AA corporate bond yield. This, in turn, impacts the maximum allowable price-earnings ratio multiplied by price-to-book ratio for the screen.
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Just buying the screened stocks though hasn't worked very well apparently:
Enterprising: -20% ytd; 9.8% 5-year
Defensive (non utility): -6.1% ytd; 6.3% 5-year
Might be better off with EKS's Graham-number approach.
Or incorporate momentum: O'Neil CAN SLIM revised 3rd edition looks to be the winner of all AAII approaches over the past few years -- ytd, 3-year, 5-year. |
