October 28, 2020

After we discussed the type of stock screeners being used in the last couple of videos, let’s discuss the actual criteria that you can use to improve your chances are finding a profitable stocks. Obviously, we are heading into the fundamental analysis territory and it is much more complicated than a few simple rules. But with the simple filtering criteria I have laid out for you here, you will avoid a lot of “dangerous stocks”. Avoiding dangerous stocks means you will get a higher return. After I go through the 5 tips to use a stock screener to find profitable stocks, I will dive into how you should think about revenue, net income, EPS as well. If you are interested in using a stock screener to find profitable stocks, then watch this video now.

90% correct transcript

So welcome back to my channel. And in this video, we're going to talk about five tips to use a stock screener, to find profitable stocks. So I'm going to give you a couple more criteria compared to the previous videos. I'm also going to talk about how to think about certain criteria as well. Now, previously, I did say this is a seven video series in terms of how to use stock screener, but I'm able to combine the concepts into a six video series. So this is actually the fourth one. So with that being said, let's dive into it before we start. I just want to celebrate another successful case study from Adrian, where he exited SMPL for 24% gain in two and a half months. So congratulations, Adrian for making such a successful trade. And I look forward to your next one. So right now I'm running a hundred likes campaign giveaway.

So if we get a hundred likes on this video, then I'll be giving away one of my favorite books. Now, since this training is all about technical analysis, stock screening the book I chose is harmonic trading volume two. So if you want to get this book for free, then make sure you like the video and leave a comment below. After we reach a hundred likes on this video, then I will select one of the people who commented and deliver this book to them. So we can choose the Kindle edition, which for some odd reason is just as expensive, or you can choose the paperback version as well. I don't mind you just got to give me the address. So back to five tips to using a stock screener for profitable stocks. So the first tip is actually quite straightforward. The first tip is what we have previously gone through is to use mid cap when you are being a longterm investor.

The first thing you want to do is to avoid stocks that are high risk and using market cap, the higher the market cap, you go, the safer it is, the more you can avoid losing money. So I would use that as the first criteria. So that's tip number one. Now, then I would actually go to fundamentals and for tip number two, I would focus on a revenue five-year growth of at least 0%. Now notice I actually use a 0% here across five years, which can be very lenient. So if you're getting too many stocks, then I can consider using a more restrictive criteria, like 5%. But sometimes you've got to imagine that for a company that is very mature, like Exxon-Mobile, they might not necessarily have revenue growth across some five years or a very, very small revenue growth because their market is fairly mature to pay a dividend.

And there's really not much room to grow. So depending on how aggressive you want to be, you can choose between zero to 5%. I think that's usually pretty restrictive already in terms of a criteria. I think 10%, that is actually that will narrow down your population by quite a lot. Now, the next one that you may or may not want to use is that USP growth over five years. So here again, I would choose at least 0% and you can see that to my population has actually gone down by lots. So before I use EPS growth over five years, then you'll see that as around 200. But if I use EPS growth, at least 0% stat is one 37. So if I think this is too restrictive, then I'll actually make the revenue criteria more lenient. So it's around at least 0%. So this will give you a lot of big companies are very mature and they have a positive EPS growth.

Think about this for a company like McDonald's or Coca Cola. I need to check the financials again, but for a company that is in a mature market kids, sometimes you might have a decrease in revenue because people are drinking less Coke or people are not as into fast food or whatnot, and the revenue will be decreasing, but management will be very, very good at running the company. So then their net profits will be increasing even though the revenue is decreasing. So I actually have seen that before, especially with really, really big blue chip companies that are already in the mature markets. So what you really need to consider when you're using this at least 0% criteria, but I think at least 0 percent is fine. So you can just do that. And in terms of ESP growth, when you're looking at net income growth, you're really looking at the change in earnings per share.

So if someone has losing a hundred million dollars and they're losing $50 million, that is still growth over five years. So you've got to keep that in mind. So it actually, you didn't filter for the positive or the negative sign yet. So in terms of the fourth tip, if you want to filter for that, then what you will want is to look for some sort of net income filter. Now, in this case, there isn't a net income you can choose from, but instead you can choose profit margin or operating margin. So profit margin includes tax as well. That's my understanding in this case. So I would choose at least 0% if that's possible, if not at least 5%, that is probably fairly restrictive, but I think that is a good criteria. So this means that this year or the latest year, the company is making a positive profit margin.

Now of course, the higher the profit margin, the better. And it seems like the highest I can go here is 70, 80%. So if I just change it to 70%, I'll probably find like very theory results, like three results. Okay. So let's do 5%. Okay. So this will give you a good population, 183, and you can actually play around with this a little bit more, bring this number down to less than 50 or so. But I would say, say, if you just choose these three criteria, then you'll be able to find profitable stocks because the company itself is making a profits they're growing in terms of revenue and also net income. And they have a positive profit margin as well. So I have actually eliminated a lot of higher risk companies for you already, in terms of other criteria, chances are, you might want to think about, you want to use revenue growth over one year and also EPS

growth within a year as well. So these two are more short term measures. So for example, it depends what you're really looking for. If you're looking for a company that is for the last year is still doing well, then you can make that at least 0% for both revenue and EPS. So then you're only getting the positive growth ones. But if you're looking for something that is recently doing worse than before then you would filter it for negative. So you would do add most 0 percent, something like that. And this will give you 62 results. So for example, as I'm recording this video, which we are in the middle of a pandemic, you would look for a positive revenue growth over five years, which means longterm they're growing. But for the last year, they're declining in terms of revenue. So that means they probably got impacted by COVID.

So that also means they might be on a discount, but in terms of discount stock, I'll actually make a next video about discount of stocks. So you can tune into that instead. So those are really the five tips instead of criteria to find profitable stocks. So my name is Eric Seto, and I've been investing for over 10 years now. And I tried a lot of things that worked and didn't work. And since then I have dedicated myself to helping people without financial background, to target 30% return a year from the markets using an hour a week through a coaching program called Investing Aaccelerator. So if you want to learn more than you can go to the link below, which is the first link in description or in the comments. And you'll find a free case study where I describe how I make 30% from the market using stock options.

And if you want to get the exact charting templates, I use the exactly indicators I use for free. Then you can register for the free chart course as well. So that should be quite beneficial for you. And this will set you years ahead in terms of technical analysis. And finally, if you want to get the book that we are giving away this time, which is harmonic trading, to then make sure you like this video and leave a comment below. And once we get to a hundred lights, I'll select a winner and I'll ship harmonic trading to, to your house. So in terms of free case study, once you register, make sure you click the play button and you'll notice that it's almost three hours to four hours long. So I have packed a lot of information in the free webinar, how to get 30% for the markets now for the next video, it's about two criteria to use, to stock screener, to find discount to stocks. So make sure you stay tuned. And if you want to find discounted to stocks, then next video is designed just for you. So I will see you in the next one.


About the author 

Eric Seto

Eric Seto is an investor with over 10 years of experience. He travelled around the world to help with auditing, accounting, purchase and sale of companies.

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