Getting To Know Stock Screeners

Predefined Screens

The big challenge with using screens is knowing what criteria to search for. The hundreds of variables make the possibilities for different combinations nearly endless.

Screeners are extremely flexible, but if you don't know what you're looking for or why, they can't do much for you. To help investors, some sites have predefined stock screens, which have their variables already entered.

The following sites offer some of the better predefined screens (these are just a few examples of what's out there):

Yahoo Finance - This site includes nearly 20 predetermined screens covering a large array of investment strategies, including 'strong forecasted growth', 'large-cap value ', 'small-cap growth ', and ' Dogs of the Dow '. The search criteria of each predetermined screen are clearly explained so you can understand the screens' underlying principles.

MSN Money - This site includes 10 predetermined searches. All of the searches are also clearly explained and cover various strategies, such as the contrarian strategy, and fundamentals , such as the highest dividend-yielding stocks on the S&P 500.

Morningstar - This site covers a range of trading strategies but also includes a search based on Morningstar stock ratings. By searching according to these ratings, you are accessing analyst research on the quality of a company. Things to Watch Out for When Using Stock Screeners

Although they are useful tools, stock screeners have some limitations. Here are some things you should keep in mind:

Most stock screeners include only quantitative factors. There are still many qualitative factors to keep in mind: no screener provides information about things like pending lawsuits, labor problems or customer-satisfaction levels.

Screeners use databases that update on different schedules. Always check how fresh the data is - if a screener's data isn't timely, your search could be meaningless.

Watch for industry-specific blind spots. For example, if you are searching for low P/E valuations, don't expect very many tech companies to show up. Conclusion

Remember, stock screeners are not the "magic pill" for selecting stocks. Nothing will ever replace good old-fashioned nose-to-the-grindstone research. However, screens can be a good place to start your research process as they can save time and narrow your options down to a more manageable group.