Screening Checklists

Screeners

Investment research and screener websites are where you go to find out collated historical and independent comparative information about investments. Some research sites focus on a single asset class and/or market, but some do cover a wider spectrum of investments. Most sites also have a screening functionality (called a screener), where you can narrow down the selection of investment options based on any specific criteria you require. Here is my selection - some I use on an almost daily basis!

  • For stock analysis and finding quality businesses to invest in I use and subscribe to Uncle Stock. Uncle Stock covers most of the global markets, including Oceania (New Zealand and Australian stock markets), and has a comprehensive All-in-One screener.
  • Another research web site I use is Morningstar. A lot of Financial Advisers and Analysts use Morningstar (and a lot of other research sites get their data feed from Morningstar). There are different sites for the different countries and regions they cover - example links as shown:
  1. NZ & Australia = morningstar.com.au
  2. USA = morningstar.com
  3. UK = morningstar.co.uk
  4. China = cn.morningstar.com

Checklists

You are investing for a purpose - to reach your financial goals. You need to find quality businesses or the right investment product to invest in. Taking care not to let emotion dictate your decisions. The decision has nothing to do with how you feel about the product or service a business provides.

Your decision making needs to be based on facts. Only the facts will help you identify the investment's potential.

Using a checklist to evaluate each investment opportunity is a great way of preventing your investment decisions being swayed by your emotions. Each investment option should tick all the boxes for the specific criteria listed on your checklist before you invest.

Before you start looking for businesses or investment products to invest in I encourage you to develop your own checklist of investment criteria. Everyone’s checklist will be different as these are based on the criteria that is aligned with their investment needs. Following are a couple of checklists and criteria that you can use as examples.

Example A - Growth Investment Checklist

  1. Is the business’s Return on Equity (ROE) greater than 15% and consistent?
  2. Does the business have consistent historical growth – earnings and equity - and is the business likely to continue growing?
  3. Are earnings derived from operating activities? Is the company’s operating cash flow equal to or exceeding its reported profit over a reasonable period of time?
  4. How does the business use its profit? For example, is the dividend payout ratio less than 50%, are the short-term liabilities less than the short-term assets (a low current ratio), etc?
  5. Is the company’s debt level appropriate for their business model and market position?
  6. Is the business understandable?
  7. Are they the best in their market and industry sector?
  8. Do we trust the people managing the business?


A suggested screen for Example A could be:

  • 5 year Earnings per Share (EPS) growth > 0 (positive medium-term growth)
  • 10 year EPS growth > 0 (positive long-term growth)
  • 5 year Book Value (equity per share) growth > 0
  • 10 year Book Value growth > 0
  • Dividend Payout < 0.5 (reinvesting at least 50% back into the company for growth)



Example B - Income Investment Checklist

Does the business have a high dividend payout ratio?

Does it show a good dividend yield?

Does the business have consistent historical dividend growth and is it likely to continue growing?

Are earnings derived from operating activities? Is the company’s operating cashflow equal to or exceeding its reported profit over a reasonable period of time?

Is the company’s debt level appropriate for their business model and market position?

Is the business understandable?

Are they the best in their market and industry sector?

Do we trust the people managing the business?


A suggested screen for Example B could be:

Dividend Payout Ratio > 0.5 (at least 50% of profit paid out in earnings)

Dividend yield > 5%

5 year Earnings per Share (EPS) growth > 0 (positive medium-term growth)

10 year EPS growth > 0 (positive long-term growth)

Average Dividend growth rate > 3% (3% being the estimated average rate of inflation)