Research and extensive study are the ultimate keys to near-to-perfect investment in the share. In the earlier days, conducting these processes was pretty difficult. However, introducing a screener for the stock market has made researching and monitoring quite convenient.
This is an advanced tool that helps investors to plan their strategies based on identifying potential stocks. A screener will show you the market price, P/E ratio, dividend ratio, market capitalisation, etc., so you can determine a company’s financial health.
The basic screening can only provide you with common and nominal insights. For instance, a comparison between Amazon’s and eBay’s P/E ratio – 41.32 vs 9.87. Hence, the latter is more profitable.
However, the strategy will differ a bit to discover better investment trends. Read the article below to learn the top strategies that can help you identify the hidden gems in the market.
Screening Strategies For The Seasoned PROs
The screener stock market tool usually consists of three components – a database of companies, a set of variables, and a search engine that generates a list of companies satisfying those variables. Check out how you use these features to get hold of more intricate insights.
● Fundamental Analysis
Prospects of companies can offer a deeper understanding of a brand’s financial health and potential growth. Hence, apart from technical analysis, keep an eye on their revenue growth, source of earnings, plans, debt levels, etc.
For instance, a company might not perform well for a couple of years; however, the fundamentals may reveal their plan of collaboration or expansion. This occurrence may render the potential to become a profitable stock. Hence, you purchase it at a lower price and then sell it when the demand epitomises.
● Screening Insider Buying
Are you versed with the concept of free-floating shares? If so, you should be aware that some companies retain a percentage of shares for insiders like board members, executives, etc. The insider buying trend indicates the stock’s potential growth for reasons known to insiders only.
Sometimes, it so happens that a few speculations travel around, and we strategise our plans accordingly. However, sometimes, companies choose to unveil various influential plans all of a sudden. In such cases, an urgency of purchase is witnessed, and many fail to get a hold of the share. Hence, screen companies with maximum insider buying; you may consider investing a sum beforehand.
● Consider Low-Market Capitalisation
While screening, investors majorly concentrate on large and mid-cap stocks since they are more reliable and profitable. However, this might not always be advisable. Multiple small caps might have the potential to grow, especially if the external conditions favour them.
One of the most relevant examples is Serum Institute and Bharat Biotech, which manufactured the Covid vaccine in India. The prices of the two shares skyrocketed with the onset of the pandemic. Many investors had profited largely from the company’s shares.
● Backtesting Feature
Your screener must have the backtesting feature. Suppose you have hit upon an investing strategy. How do you know if it is foolproof or near to perfection? Here lies the significance of backtesting. The historical data market metrics will reveal how profitable that strategy will be. Hence, it is advisable to backtest your moves before executing them in real-time trading with real funds.
However, remember to consider parameters like market conditions, economic or social changes, political decisions, natural calamities, etc. Hence, a strategy might have been ineffective based on various conditions that are not applicable in the contemporary scenario.
● Activate Risk-Management
You can use multiple features to minimise your loss, even when you experiment with different strategies. These filters are volatility measures, stop loss, liquidity ratios, etc. This will give you a safe ground to grab potential opportunities and maximise your profit without incurring dramatic losses.
Final Thoughts
If you have been engaged in the share market game for a prolonged period, it is high time to take your strategies a notch higher for better returns. You can choose one of the best screeners in India like Motilal Oswal’s Research 360 to stay ahead in the game. This offers more than 200 screeners to aid you in making more effective decisions.
