Using computer to narrow interesting stock list

**balaoko** Sat Aug 05, 2006 1:35 pm

Using computer to narrow interesting stock list
Blast has shown a screen tool to search insider buying list each week. That weekly newsletter is his generous gift searched from internet to all of us who are learning value investing or picking valuable stocks. As a student learning how to narrow interesting stocks, I finally found that it is a benefitial trial to apply computer searching not only stocks with insider buying, but stocks passed various creteria defined by a student, including value oriented and technique oriented. Many people are using computer to improve their prediction from technique points of view, and they published numerous papers based on it. Anyone who is interested in those papers can google them. Since I am changing my style from technique analysis to fundamental analysis, I tried show how I did recently to search interesting stock based on my understanding of value, hoping that it may incur numerous bad eggs that help me improve my result:)

First of all, one might search a complete list of all stocks. Thanks to Blast's hint that I can develop a robot to parse the webpages and get information from internet. I was so happy to develop such tools and was so greedy at the beginning that I tried to found all the ticks from yahoo!. Finally I got more than 36000 picks (and the corresponding company names) by searching ticks alphamerically. Then the nightmare began. It took a whole day for my poor computer to search all the finantial data for each of them. Since most of them have no such data in Yahoo! at all, I was very confused about what happen to them. At last I found that most of them are just companies not tradable at all. Now I am searching the list by sector and industries. By that way only about 7000 stocks was collected and they are more safe stocks than those 36000 ones in terms of risk. According to Graham's and Buffet's theories, stocks in sectors "Finance" and "Technology" are not under my study at this moment. At the end, there are only less than 4000 stocks under my further screen.

The following actions depends on what one wants. Of course the insider buying list is important. The insider buying list is rather long for each week. I feel not comfortable to have a look at each of them, even browse them in Yahoo!. So my search results are narrowed futher under some restrict creteria. For example, the amount of a single insider buying transaction should be equal to or larger than 100k, and the shares outstanding should be 10M or more. I am very happy to see the much shorter list after those filters.

Insider sale list is also important for those stocks I have. Although it may say nothing about the fundamental of the company, it is an obvious alert to me.

Other computations are also helpful for picking stocks without insider buying at all. I tried computing the free cash flow under normal conditions, which excludes non-recurrence incomes. Recently I added new creteria like current ratio and quick ratio which narrow the list further.

From the computer results I chose some and put them into my simulation model to test my understand of value. I hope I can have more time to read the annual reports of those stocks and determine whether they have true values.

In short, the computer is a great tool that people like me can apply to dig out valuable stocks.