Santa Cruz Sentinel

Look at the fastest growers

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All else being equal (of course it never is), stock prices track earnings per share more than any other single factor. Thus it makes sense to own stocks likely to record strong earnings per share growth while you hold them.

Today, I’ll describe a stock screen for finding such fast growers. It’s similar to a screen that I described in October 2020, however, the overall economy is a lot hotter now, so I’ve been able to tweak the numbers to find even better prospects.

As is usually the case, I’ll use the free and userfriend­ly Finviz stock screener to demonstrat­e the process. It offers a variety of screening parameters, which it calls “filters.”

Setup screener

From the Finviz homepage, select “screener” and then “all” on the screen filters bar to see the available filters. For each filter that you want to use, use the adjacent dropdown menu to select a filter value.

Define target universe

Since the U.S. stock market is still the strongest, start by selecting “USA” on the Country filter. Next, use the Market Cap (value of all outstandin­g shares) filter to specify “over $2 billion” to rule out higher risk smaller stocks.

Along those same lines, use the Price filter and specify “Over $30” to rule out cheaper stocks, which contrary to what you might think, are the riskiest plays.

Isolate fast growers

Most stocks grow earnings less than 5% annually. But, here’s how we’ll pinpoint much faster growers. Select the “EPS Growth This Year,” “EPS Growth Next Year,” and “EPS Growth Next Five Years” filters and specify “Over 20%” for each. Less than 2% of all stocks will meet those requiremen­ts.

Next, use the “Sales Growth Quarter Over Quarter” filter and specify “Positive (>0%)” to assure that at least some of our passing stocks’ EPS growth came from higher sales, not just cost cutting.

Profitabil­ity drives earnings

The more profitable the stock, the more cash it generates to fund growth and pay dividends. Return on Equity (ROE), which is net income percentage of net assets, is a popular profitabil­ity gauge. Use the return on equity filter to specify “Over +20%” Which limits your list to the most profitable stocks. In fact, only 11% of U.S.-listed stocks could pass that test.

Follow big money

Institutio­nal owners such as mutual funds and pension funds have access to informatio­n that you and I never see. Specify “Over 50%” for Institutio­nal Ownership, and “positive” for Institutio­nal Transactio­ns, to assure that these wired-in players not only hold significan­t positions, but are still adding to their holdings.

Stocks analysts like

Stocks analysts spend their days analyzing stocks. Use the Analyst Recommenda­tion filter to piggyback on their efforts by specifying “Buy or Better.”

Make the trend your friend

Use the “price above simple moving average (SMA)” filter for both the 50-day and 200-day SMA filters to limit your list to already uptrending stocks, which are always your best bets.

Five hot stocks

My screen turned up five hot growth prospects.

Advanced Micro Devices (ticker: AMD), Amazon.com (AMZN), Digital Turbine (APPS), Netflix (NFLX) and Sysco Corp. (SYY).

As always, consider the results of this screen to be research candidates, not a buy list.

Harry Domash of Aptos publishes the Winning Investing and the Dividend Detective websites. Contact him at www.winninginv­esting. com or Santa Cruz Sentinel, 324 Encinal St., Santa Cruz, CA 95060. To see previous Domash columns, visit santacruzs­entinel.com/ topic/Harry_Domash.

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