Mining Precious Gems Read online

  #​Mining Precious Gems

  Screening methodologies for profitable stocks in the

  Indian stock market

  Author: Vinod Sreedharan

  About the author

  I am a ful -time stock market investor and trader who is very passionate

  about stock markets and equities. The whole human psychology and

  behavioural aspects of economics that drive the ups and downs of stock

  and market movements real y inspires me.

  I believe that to have a sustained success in the stock market irrespective

  of any methodology, o

  ne n

  eeds to b

  uild a

  p

  ersona t hat t hrives o

  n r

  elentless

  and constant learning. In other words, you have got to be a humble and

  lifelong learner. This, perhaps, is the only ‘​ open secret’ that comes across

  as consistent among al the great and wise investors who ever walked

  planet Earth.

  Beyond this, in my experience, there does not seem to be any perfect

  recipe that works al the time in selecting winning stocks. We see many

  articles, books, posts that claim to teach the so cal ed “​ Secrets​” of stock

  picking. But once a secret is let out, it no longer remains a secret!! The

  market is a ​ quick evolving ‘creature’ that aggressively adapts itself to

  negate the advantages of possessing these so cal ed arguably eternal

  ‘secrets’.

  For these reasons, I find the best hedge (or edge) an average regular

  investor could have is to build a disciplined, unbiased, objective and

  focussed approach to selecting stocks. An approach that can be adapted,

  modified and tweaked to accommodate various factors. One that would

  adapt nimbly t o changes t hat k

  eep occuring on m

  acros o

  r politico-economic

  circumstances that affects markets. One that adapts to proactive and

  reactive market dynamics.

  To that end - this book is an ode to learning, an ode to using screeners a

  s

  one way to inculcate disciplined stock market picking. A strategy that is

  customisable, adaptable, amenable to feedback. This k

  ind o

  f m

  ethodology,

  keeps us - the investors - grounded, a

  gile a

  nd a

  lways l earning, e

  ven a

  s w

  e

  see results and/or reap profits from our picking.

  Remember this - “​ there are real y no failures, there is only feedback” ​. So,

  stay positive, humble and keep learning. Focus on the process and the

  personality, the persistence and the passion - results we desire wil fol ow

  in due course. When a process (vs fluke) drives the outcomes for most

  part, we give lady luck the best chance to play on our side.

  Happy investing!

  Thank you - Vinod Sreedharan

  < ​[email protected]​ >

  Gratitude

  Dedicated to life changing personality traits - “​ Passion, Persistence,

  Purpose, Positivity​” and the wil to be a relentless, humble, sincere lifelong

  reader and learner!

  Table of Contents

  1. Introduction

  2. Screener.in

  3. The Fundamentals

  4. Customizing screener.in

  5. The Screens

  6. Conclusion

  Introduction

  This book is an effort to encourage and highlight the use of screeners to

  have a “bottom-up” approach for effective and o

  ptimized s

  tock s

  election. It

  aims to help the readers build a screener based stock selection amidst al

  the choices of listed stocks in the Indian stock market. Further, the core

  emphasis wil be on using ​ screener.in and significant methodologies and

  paradigms that can be applied to build effective queries (aka screens)

  using ​ screener.in

  The ‘Why’ for Screeners

  Screening the market for prospective stocks is by far the most disciplined,

  dis-passionate and effective way to find good stock investment ideas.

  Typical y, we look at stocks based on what we see and hear - analyst

  reports, social media and other ‘tips and recommendations’, television and

  media news, periodicals and broadcasts, friends and relatives’ favourite

  lists et al. No matter which method is engaged in lining up the stocks of

  interest to us, screening gives us a dispassionate, objective, relatively

  less-biased option to verify, round up, enlist and cross-check stocks of

  interest.

  Screening for stocks is also a direct by-product being very correlated and

  in-line with the age of computers and technology. Today, algorithms can

  quickly run on the background and provide enriched data as a response t o

  ‘smart’​ querying.

  However good one is at reading financial reports, annual reports, business

  journals, analyst stories and thereby deciphering and interpreting business

  prospects, screening helps you sense and dig into smart opportunities in a

  much rapid, disciplined, objective, relaxed method.

  Thus, screeners are immensely valuable once you learn, roundup and

  practice the ‘criteria set’ that matters to your investing methodology and

  investing persona. More information on the prospective ‘criteria set’ and

  more on an ‘investing persona’ wil come up in further chapters going

  ahead.

  The ‘What’ for Screeners

  If you are asking or just thinking aloud - “What are screeners(?)”, let’s do

  some de-mystification.

  Screeners are essential y smart stock querying tools. The way screeners

  work is pretty simple and straightforward. Through a screener, we ask the

  system to search through a database and identify stocks that match a set

  of specified criteria. The criteria is a set of ‘popular’ or standard stock

  fundamental (and/or technical) characteristic(s) that we find appealing or

  al uring. The characteristic could be based on a numerical or logical

  comparison (ie. greater than, lesser than equal to, AND ,

  OR etc). A col ection of this criteria characteristic as a set is

  cal ed a ‘screen’.

  The results of such a screen would be the specific list of stocks t hat m

  atch

  and fit the specified criteria. The result could be a smal number if the

  criteria s

  et i s v

  ery n

  iche a

  nd/or e

  xtreme / strict. In the s

  ame v

  ein, i t c

  ould be

  a large number if the criteria set is relaxed, very basic or generic.

  In summary, we put in a criteria set into the screener utility to query the

  stock market to get us a list of stocks that fit nicely and that match into t he

  specified criteria characteristic set.

  The ‘Who’ & ‘When’ for Screeners

  ● Who exactly are
screeners for?

  ● What kind of users or stock market participants are screeners meant

  for?

  ● What level of expertise is needed to use them?

  ● When does anyone use them?

  These must be the next set of curious queries that need answers, aren’t

  they! Wel , here goes…

  Screeners are meant real y for everyone and anyone interested in stocks

  and the stock market in any form and timeframe. The screening paradigm

  is very purposeful in helping a below average performing stock market

  participant to prospectively improve their odds of better and superior

  potential return yield. If used wel , based on practice, feedback and

  adapting - the screeners can help raise our game and avoid being gul ible

  to al s

  orts o

  f s

  tock m

  arket ‘ wisdom generalities’, w

  hich are p

  retty u

  nhelpful,

  sub-optimal and impractical in real world investing.

  In summary, screeners can be used by al stock market participants

  irrespective of their time in, experience of and knowledge about the stock

  markets. Of course, like most things in life, the yield might vary from

  person to person (or case to case) based on multiple variables at play,

  many of which are in an ​individual’s sphere of control and are ​ trainable

  aspects.

  Final y, screeners can be used often and regularly. They ​should be used

  often and regularly. They should in fact be used as the first step in a

  ‘bottom up’ process of evaluating the entire stock market - looking for

  potential opportunities of sustainable return yield generation.

  The ‘Which’ of Screeners

  So which screener d

  o y

  ou u

  se a

  mong t he a

  vailable o

  nes ?

  That’s t he next

  curious question isn’t it! (?)

  Here are some of the choices we have…..let’s peek in.

  1) Screener.in

  Website:​ ​https://www.screener.in/

  Charge: Free ​(** Screener Gold has paid premium features)

  Custom Querying: Yes! Very flexible

  Fundamental/Technical: Pure Fundamental

  Pre-set Screens: Available

  2) Trendlyne

  Website:​ ​https://trendlyne.com/stock-screeners/

  Charge: Basic is Free / Paid for Advanced/Expert features

  Custom Querying: Yes! Very flexible

  Fundamental/Technical: Fundamental / Technical (Techno-Funda possible)

  Pre-set Screens: Available

  3) Equitymaster Stock Screener

  Website​: ​https://www.equitymaster.com/research-it/company-info/stock-screener-india.asp

  Charge: Basic is Free

  Custom Querying: Limited via pre-built choices

  Fundamental/Technical: Fundamental

  Pre-set Screens: Available (** preferred choice in this)

  4) Marketsmojo

  Website: ​https://www.marketsmojo.com/mojo/professionalhome

  Charge: Paid

  5) ValueResearch

  Website​: ​https://www.valueresearchstocks.com

  Charge: Paid

  Custom Querying: Via pre-built choices

  Fundamental/Technical: Fundamental

  Pre-set Screens: Available

  -------------------------------------------------------------------------------------------------------------------------------

  There are a few more aside from the above a

  nd t here a

  re others w

  hich a

  re

  more ‘pure’ technical screeners for querying based o

  n s

  tock c

  hart p

  atterns,

  candlesticks and indicators.

  While we avoid getting deep into the likeability and pros/cons o

  f one v

  s t he

  other among these, for the purpose of this book, we wil stick to using

  ‘​screener.in​’ - the free version.

  Screener.in

  Thus far, we covered the [ ​‘What’, ‘Why’, ‘Which’, ‘When’, ‘Who’ ​] of

  screeners and screening.

  This section of the book is about the screener.in website/tool and its usage.

  So, we have reached the ​‘How’​ of screeners here.

  I am sure some of us are now reasonably curious (even convinced!) that

  screeners are very useful and we want to go ahead and try them out. In

  that, we wil use the free version of screener.in as our go-to screener for

  the rest of this book.

  Let us go through some of the basic steps of screener.in usage and some

  of its core aspects that are useful to know Day-one.

  Browsing through screener.in

  1) Using your favourite browser, go to ​www.screener.in

  2) The first thing to-do is to create a user login for ourselves. Use the

  login tab on the main page for this. Then u

  se t he ‘ Register f or free’ o

  ption

  to create a user login/password for yourself.

  3) Once logged in, you get the main logged in page.

  4) There is an option for issuing a ‘custom query’ at the bottom left of this

  page

  5) ​The Guide

  https://www.screener.in/guides/creating-screens/

  This is must-read. Spending 5-10 minutes on this article wil give you a

  good overview on how to create screens at a high level.

  At this time, I would recommend that you spend some time going through

  this ‘creating screens’ page.

  Once you complete this activity, you wil now have a clear picture of:

  a) Creating/Building out a new query

  b) Customisation of options in the column display

  c) Saving the custom query screen

  d) Setting alerts

  6) In the ‘Company Search’ option on the main screener page, we can

  search for any stock we are interested in. I use the example of ‘Infosys’

  here to il ustrate:

  The result for the company/stock searched for are:

  a) A basic set of fundamental stock parameters (customisable by the

  user)

  b) A line chart of stock price performance (And volume) over multiple

  periods that can be selected by the user

  c) Pros / Cons of the company/stock under view

  d) Peer Comparison in the sector

  e) Quarterly Results figures

  f) Annual Profit and Loss figures

  g) Balance Sheet numbers

  h) Cash Flows details

  i) Other info - Recent Announcements, Annual Reports, Credit Ratings

  One interesting piece of information can be viewed just below the Profit &

  Loss section that highlights the periodic stock performance on the most

  discussed and sought after fundamental parameters.

  The above covers the basic usage of screener.in to screen stocks.

  A few ‘advanced user’ custom configuration options that could also be

  useful is discussed in a later chapter.

  The Fundamentals

  Screeners, much like any other data and analytics tools around, work on

  the ‘​ garbage in - garbage out​’ paradigm. The results you g

  et o

  n a

  ny q

  uery

  based s

  ystem w

  il m

  ost l ikely be in c

  ongruence w

  ith
t he q

  uality a

  nd intent o

  f

  the user specified criteria-set in the query employed.

  The above a

  spect b

  eing the f ulcrum a

  nd b

  ottomline -

  a

  n

  ecessary a

  spect o

  f

  effect screening is a sound hold on basics of “Stock Fundamentals”. In

  that, knowing ‘ what i s g

  ood’ a

  nd h

  ence w

  e w

  ant more o

  f it, and ‘ what i s n

  ot

  good’ and hence we want less or none of it - is very critical to effective

  screening for stocks.

  One other aspect where this would prove critical is - broad based generic

  queries wil lead to a huge number of results that is simply impractical and

  not useful. So, essential y o

  nce s

  uch results a

  re o

  bserved, i t i s i mportant t o

  further fine-tune and increase the expectation of the ‘ask’ as far as the

  screener query is concerned. This wil help eliminate noise and reach the

  real core set of a

  s

  mal n

  umber of s