How to find out of favor stocks
A reader has written saying, he is not very comfortable trading momentum and he would like to research out of favor stocks before they make a move. I get lot of emails like this from people who are not psychologically attuned to trading momentum based system. They are in other words value investors.
So I spent some time thinking about it and developed this simple screen to find out of favor, neglected stock. Most such stocks have many problems currently , but they might become good turnaround candidates. In some cases the sector is cyclical and out of favor. So one has to investigate the stocks to find value amongst them. In the stock market, it just takes a catalyst to get a out of favor stock back in to favour. So looking at these kind of stocks is not a bad idea.
So here is very simple screen to find out of favor stocks. Again it uses Telechart.
- This scan uses the Easyscan functionality of Telechart.
- Set up a Easyscan with Watchlist=All Stocks. Then add following parameters.
- Price Growth Rate 5 years= Rank 1 to 25
- Price Growth Rate 3 years= Rank 1 to 25
- Price Growth Rate 2 years= Rank 1 to 25
- Price Growth Rate 1 years= Rank 1 to 25
- Price Percent Change 26-week= Rank 1 to 25
- This will give you around 200 stocks to work with. You can use classical value based matrix to shortlist candidates from this.
- Alternatively you can use a 4% breakout scan like ( 100 * (C - C1) / C1) >= 4 AND V >= 1000 AND V > V1 to generate few candidate to look at on daily basis. After all an out of favor stock must start rallying for it to make money.
As of now if you run this scan it gives following 217 stocks:
ADG,Allied Defense Group (the) (Google Yahoo Earnings Chart)
ADLR,Adolor Corporation (Google Yahoo Earnings Chart)
ADPT,Adaptec Inc (Google Yahoo Earnings Chart)
ADSX,Applied Digital Solution (Google Yahoo Earnings Chart)
AGIX,Atherogenics Inc (Google Yahoo Earnings Chart)
ALLB,Greater De Valley Svg Bk (Google Yahoo Earnings Chart)
ALT,Alteon Inc (Google Yahoo Earnings Chart)
AMC,American Mtg Acceptance (Google Yahoo Earnings Chart)
AMM,AMS Health Sciences Inc (Google Yahoo Earnings Chart)
ANLT,Analytical Surveys Inc (Google Yahoo Earnings Chart)
ANLY,Analysts International (Google Yahoo Earnings Chart)
ANPI,Angiotech Pharmaceutical (Google Yahoo Earnings Chart)
APPA,Ap Pharma Inc (Google Yahoo Earnings Chart)
AROW,Arrow Financial Corp (Google Yahoo Earnings Chart)
ASBI,Ameriana Bancorp (Google Yahoo Earnings Chart)
ASTT,Asat Holdings Ltd (Google Yahoo Earnings Chart)
ATAR,Atari Inc (Google Yahoo Earnings Chart)
AVAN,Avant Immunotherapeutics (Google Yahoo Earnings Chart)
BBA,Bombay Inc (Google Yahoo Earnings Chart)
BFT,Bally Total Fit Hldg (Google Yahoo Earnings Chart)
BKHM,Bookham Inc (Google Yahoo Earnings Chart)
BPOP,Popular Inc (Google Yahoo Earnings Chart)
BRKL,Brookline Bancorp Inc (Google Yahoo Earnings Chart)
BSX,Boston Scientific Corp (Google Yahoo Earnings Chart)
BUCA,Buca Inc (Google Yahoo Earnings Chart)
CADE,Cadence Financial Corp (Google Yahoo Earnings Chart)
CAU,Canyon Resources Corp (Google Yahoo Earnings Chart)
CDIC,Cardiodynamics Intl Corp (Google Yahoo Earnings Chart)
CHFC,Chemical Financial Corp (Google Yahoo Earnings Chart)
CLS,Celestica Inc (Google Yahoo Earnings Chart)
CMLS,Cumulus Media Inc (Google Yahoo Earnings Chart)
CMPP,Champps Entertainment (Google Yahoo Earnings Chart)
CNBKA,Century Bancorp Inc Cl A (Google Yahoo Earnings Chart)
COA,Coachmen Industries Inc (Google Yahoo Earnings Chart)
CPWM,Cost Plus Inc California (Google Yahoo Earnings Chart)
CRBC,Citizens Republic Bancorp Inc (Google Yahoo Earnings Chart)
CRC,Chromcraft Revington Inc (Google Yahoo Earnings Chart)
CREAF,Creative Technology Ltd (Google Yahoo Earnings Chart)
CRGI,Corgi International Ltd ADR (Google Yahoo Earnings Chart)
CRGN,Curagen Corp (Google Yahoo Earnings Chart)
CSAR,Caraustar Industries Inc (Google Yahoo Earnings Chart)
CSK,Chesapeake Corp (Google Yahoo Earnings Chart)
CTE,Cardiotech Internat Inc (Google Yahoo Earnings Chart)
CTIC,Cell Therapeutics Inc (Google Yahoo Earnings Chart)
CTTY,Catuity Inc (Google Yahoo Earnings Chart)
CTU,Chad Therapeutics A (Google Yahoo Earnings Chart)
CYAN,Cyanotech Corp (Google Yahoo Earnings Chart)
CYTO,Cytogen Corp (Google Yahoo Earnings Chart)
CZNC,Citizens & Northern Corp (Google Yahoo Earnings Chart)
DAIEY,Daiei Inc Adr (Google Yahoo Earnings Chart)
DANKY,Danka Business Syst Adr (Google Yahoo Earnings Chart)
DEVC,Devcon International Corp (Google Yahoo Earnings Chart)
DHOM,Dominion Homes Inc (Google Yahoo Earnings Chart)
DLK,Semotus Solutions Inc. (Google Yahoo Earnings Chart)
DLPX,Check Technology Corp (Google Yahoo Earnings Chart)
DRL,Doral Financial Corp (Google Yahoo Earnings Chart)
DROOY,DRD Gold Ltd Adr (Google Yahoo Earnings Chart)
EMAK,Emak Worldwide Inc (Google Yahoo Earnings Chart)
EMVL,Euroweb International Corp New (Google Yahoo Earnings Chart)
ESCA,Escalade Inc (Google Yahoo Earnings Chart)
ESCC,Evans & Sutherland Comp (Google Yahoo Earnings Chart)
ETC,Environmental Tectonics (Google Yahoo Earnings Chart)
FACT,First Albany Companies (Google Yahoo Earnings Chart)
FAVS,First Aviation Srvcs Inc (Google Yahoo Earnings Chart)
FBC,Flagstar Bancorp Inc (Google Yahoo Earnings Chart)
FBMI,Firstbank Corp (Google Yahoo Earnings Chart)
FBN,Furniture Brands Intl (Google Yahoo Earnings Chart)
FBR,Friedman Billings Ramsey (Google Yahoo Earnings Chart)
FCF,First Commonwealth Finl (Google Yahoo Earnings Chart)
FCZA,First Citizens Banc Corp (Google Yahoo Earnings Chart)
FFBC,First Financl BAncorp Oh (Google Yahoo Earnings Chart)
FMDA,Futuremedia Plc Adr (Google Yahoo Earnings Chart)
FMER,Firstmerit Corp (Google Yahoo Earnings Chart)
FNBN,FNB United Corp (Google Yahoo Earnings Chart)
FNLY,Finlay Enterprises Inc (Google Yahoo Earnings Chart)
FONR,Fonar Corp (Google Yahoo Earnings Chart)
FRNT,Frontier Airlines Inc (Google Yahoo Earnings Chart)
GFSI,Goldleaf Financial Solutions Inc (Google Yahoo Earnings Chart)
GNSS,Genesis Microchip Inc Delaware (Google Yahoo Earnings Chart)
GNTA,Genta Incorporated (Google Yahoo Earnings Chart)
GPTX,Global Payment Tech Inc (Google Yahoo Earnings Chart)
GRIN,Grand Toys Intl Inc (Google Yahoo Earnings Chart)
HDTV,Spatialight Inc (Google Yahoo Earnings Chart)
HEII,Hei Inc (Google Yahoo Earnings Chart)
HEPH,Hollis-eden Pharmaceut (Google Yahoo Earnings Chart)
HNBC,Harleysville National Cp (Google Yahoo Earnings Chart)
HORT,Hines Horticulture Inc (Google Yahoo Earnings Chart)
HOTT,Hot Topic Inc (Google Yahoo Earnings Chart)
HRVE,Harvey Electronics Inc (Google Yahoo Earnings Chart)
HTCH,Hutchinson Technolgy Inc (Google Yahoo Earnings Chart)
HTRN,Healthtronics Inc (Google Yahoo Earnings Chart)
IFC,Irwin Financial Corp (Google Yahoo Earnings Chart)
IG,Igi Inc (Google Yahoo Earnings Chart)
IMH,Impac Mortgage Holdings (Google Yahoo Earnings Chart)
IMX,Implant Sciences Corp (Google Yahoo Earnings Chart)
INFO,Metro One Telecommunications Inc (Google Yahoo Earnings Chart)
INFS,Infocus Corporation (Google Yahoo Earnings Chart)
INSM,Insmed Inc (Google Yahoo Earnings Chart)
INVX,Innovex Inc (Google Yahoo Earnings Chart)
IRN,Rewards Network Inc (Google Yahoo Earnings Chart)
ISON,Isonics Corp (Google Yahoo Earnings Chart)
ISWI,Interactive Systems Worldwide (Google Yahoo Earnings Chart)
ITP,Intertape Polymer Group (Google Yahoo Earnings Chart)
IVC,Invacare Corp (Google Yahoo Earnings Chart)
IVD,Ivax Diagnostics (Google Yahoo Earnings Chart)
JACO,Jaco Electronics Inc (Google Yahoo Earnings Chart)
JDSU,JDS Uniphase Corp (Google Yahoo Earnings Chart)
JRC,Journal Register Co (Google Yahoo Earnings Chart)
JXSB,Jacksonville Bancorp Inc Il (Google Yahoo Earnings Chart)
KIRK,Kirkland's Inc (Google Yahoo Earnings Chart)
KT,Katy Industries Inc (Google Yahoo Earnings Chart)
LCRY,Lecroy Corp (Google Yahoo Earnings Chart)
LGVN,Logicvision Inc (Google Yahoo Earnings Chart)
LRP,Lorus Therapeutics Inc (Google Yahoo Earnings Chart)
LRT,Ll&E Royporation (Google Yahoo Earnings Chart)
LXBK,Lsb Bancshares Nc (Google Yahoo Earnings Chart)
LXRX,Lexicon Pharmaceuticals Inc (Google Yahoo Earnings Chart)
MBTF,Mbt Financial Corp (Google Yahoo Earnings Chart)
MCEL,Millennium Cell Inc (Google Yahoo Earnings Chart)
MDWV,Medwave Inc (Google Yahoo Earnings Chart)
MECA,Magna Entertainment Corp (Google Yahoo Earnings Chart)
MEDW,Mediware Info Systems (Google Yahoo Earnings Chart)
MEG,Media General (Google Yahoo Earnings Chart)
MFCO,Microwave Filter Co Inc (Google Yahoo Earnings Chart)
MFSF,Mutualfirst Financial (Google Yahoo Earnings Chart)
MHO,M/i Homes Inc (Google Yahoo Earnings Chart)
MII,MicroIslet Inc (Google Yahoo Earnings Chart)
MKTY,Mechanical Technology (Google Yahoo Earnings Chart)
MNI,Mcclatchy Company (The) (Google Yahoo Earnings Chart)
MODT,Modtech Holdings Inc (Google Yahoo Earnings Chart)
MZT,Matritech Inc (Google Yahoo Earnings Chart)
NABI,Nabi Biopharmaceuticals (Google Yahoo Earnings Chart)
NASI,North American Scientifc (Google Yahoo Earnings Chart)
NEOL,Neopharm Inc (Google Yahoo Earnings Chart)
NFI,Novastar Financial Inc (Google Yahoo Earnings Chart)
NGEN,Nanogen Inc (Google Yahoo Earnings Chart)
NPSP,Nps Pharmaceuticals Inc (Google Yahoo Earnings Chart)
NTBK,Net.Bank Inc (Google Yahoo Earnings Chart)
NTII,Neurobiological Technolg (Google Yahoo Earnings Chart)
NTN,NTN Buzztime Inc (Google Yahoo Earnings Chart)
OAKF,Oak Hill Financial Inc (Google Yahoo Earnings Chart)
OCFC,Oceanfirst Fincl Corp (Google Yahoo Earnings Chart)
OFG,Oriental Financial Group (Google Yahoo Earnings Chart)
ONB,Old National Bancorp In (Google Yahoo Earnings Chart)
ONH,Orion Healthcorp Inc (Google Yahoo Earnings Chart)
OPOF,Old Point Financial (Google Yahoo Earnings Chart)
OSCI,Oscient Pharmaceuticals Corp (Google Yahoo Earnings Chart)
OUTD,Outdoor Channel Holdings Inc (Google Yahoo Earnings Chart)
OVRL,Overland Storage Inc (Google Yahoo Earnings Chart)
PANC,Panacos Pharmaceuticals Inc (Google Yahoo Earnings Chart)
PARS,Pharmos Corp (Google Yahoo Earnings Chart)
PCBI,Peoples Community Bncrp (Google Yahoo Earnings Chart)
PCYC,Pharmacyclics Inc (Google Yahoo Earnings Chart)
PILL,Proxymed Inc (Google Yahoo Earnings Chart)
PLI,Proliance International Inc (Google Yahoo Earnings Chart)
PLUG,Plug Power Inc (Google Yahoo Earnings Chart)
POTP,Point Therapeutics Inc (Google Yahoo Earnings Chart)
PPK,Polyair Inter Pack Inc (Google Yahoo Earnings Chart)
PQE,Proquest Company (Google Yahoo Earnings Chart)
PRCS,Praecis Pharmaceuticals (Google Yahoo Earnings Chart)
PRK,Park National Corp (Google Yahoo Earnings Chart)
PTA,Penn Treaty American Corp (Google Yahoo Earnings Chart)
PTIX,Performance Tech Inc (Google Yahoo Earnings Chart)
PWOD,Penns Woods Bancorp Inc (Google Yahoo Earnings Chart)
PXG,Phoenix Footwear Grp Inc (Google Yahoo Earnings Chart)
PXLW,Pixelworks Incorporated (Google Yahoo Earnings Chart)
QFAB,Quaker Fabric Corp (Google Yahoo Earnings Chart)
RIVT,Riviera Tool Company (Google Yahoo Earnings Chart)
RLRN,Renaissance Learning Inc (Google Yahoo Earnings Chart)
RVP,Retractable Technologies Inc (Google Yahoo Earnings Chart)
SCB,Community Bankshares Sc (Google Yahoo Earnings Chart)
SCKT,Socket Communications (Google Yahoo Earnings Chart)
SCT,Scottish Re Group Limited (Google Yahoo Earnings Chart)
SEMIQ,All Amer Semiconductor (Google Yahoo Earnings Chart)
SFP,Salton Inc (Google Yahoo Earnings Chart)
SKYE,Skyepharma Plc ADS (Google Yahoo Earnings Chart)
SNT,Senesco Technologies (Google Yahoo Earnings Chart)
SPA,Sparton Corp (Google Yahoo Earnings Chart)
SPC,Spectrum Brands Inc (Google Yahoo Earnings Chart)
SRT,Startek Inc (Google Yahoo Earnings Chart)
SSFC,South Street Finl Center (Google Yahoo Earnings Chart)
STEN,Sterion Inc (Google Yahoo Earnings Chart)
STG,Stonepath Group Inc (Google Yahoo Earnings Chart)
STL,Sterling Bancorp (Google Yahoo Earnings Chart)
SYBR,Synergy Brands Inc (Google Yahoo Earnings Chart)
TAGS,Tarrant Apparel Group (Google Yahoo Earnings Chart)
TECUB,Tecumseh Products Cl B (Google Yahoo Earnings Chart)
TELK,Telik Inc (Google Yahoo Earnings Chart)
TMTA,Transmeta Corporation (Google Yahoo Earnings Chart)
TOA,Technical Olympic Usa Inc (Google Yahoo Earnings Chart)
TRMS,Trimeris Inc (Google Yahoo Earnings Chart)
TRPS,Tripos Inc (Google Yahoo Earnings Chart)
TRST,Trustco Bank Corp Ny (Google Yahoo Earnings Chart)
TSTF,Teamstaff Inc (Google Yahoo Earnings Chart)
TUTR,Plato Learning Inc (Google Yahoo Earnings Chart)
TWP,Trex Co Inc (Google Yahoo Earnings Chart)
TWTR,Tweeter Home Entertainmt (Google Yahoo Earnings Chart)
ULGX,Urologix Inc (Google Yahoo Earnings Chart)
UWN,Nevada Gold & Casinos (Google Yahoo Earnings Chart)
VDM,Van Der Moolen (Google Yahoo Earnings Chart)
VERT,Verticalnet Inc (Google Yahoo Earnings Chart)
VEXP,Velocity Express Corp (Google Yahoo Earnings Chart)
VFL,Delaware Inv Fl Ins Muni Inc (Google Yahoo Earnings Chart)
VIAP,Via Pharmaceuticals (Google Yahoo Earnings Chart)
VIRL,Virage Logic Corporation (Google Yahoo Earnings Chart)
VLNC,Valence Technology Inc (Google Yahoo Earnings Chart)
VLTS,Valentis Inc (Google Yahoo Earnings Chart)
VOCL,Vocaltec Communications (Google Yahoo Earnings Chart)
VRA,Viragen Inc (Google Yahoo Earnings Chart)
VSGN,Vasogen Inc (Google Yahoo Earnings Chart)
WFBC,Willow Financial Bancorp Inc (Google Yahoo Earnings Chart)
WFII,Wireless Facilities Inc (Google Yahoo Earnings Chart)
WHI,W Holding Company (Google Yahoo Earnings Chart)
WPL,Wp Stewart & Co (Google Yahoo Earnings Chart)
WWVY,Warwick Valley Telephone (Google Yahoo Earnings Chart)
XJT,Expressjet Holdings Inc (Google Yahoo Earnings Chart)
ZANE,Zanett Inc (Google Yahoo Earnings Chart)
around 40 stocks from the list are up 15% plus in last 65 days from their lows. So if you are value investor, you may find this approach useful. As always do your own testing and modification.
In fact while developing this method I found other very good methods and some of them might have lot of potential. One of them I am testing to see how it performs over past data and might get added to Episodic Pivot scans.
14 comments:
I love it! A purely technical analysis method for finding value stocks!
Pradeep, perhaps adding some fundamentals would help the system; require the stock have earnings, or require a growing book value per share, or perhaps an ROA or ROE above a certain threshold?
Thanks.
That is what I am experimenting with, One cannot do those things in Telechart, so I am inputing this output to other software and testing some of things which you mentioned.
The scan gives you a set of candidates for further study. More than 60% of them can be eliminated by using price/volume, but remaining stocks have some gems in them.
To some extent, the traditional "value" measures of price to book, price to earnings, or price to sales ratios incorporate both the technical aspect of "beaten down" and the fundamental aspect of "good companies," making value investing a "blend" of the technical and fundamental. What I've found is that low PE equates to "out of favor," but that unfortunately includes peaking stocks where Mr. Market doesn't think the current earnings will keep growing, so a purely technical measure of price loss over time is needed.
Telechart has some output my broker's screen doesn't, etc for other screens. I have yet to find a single interface that allows for all the screening I'd like to do.
If I may be so bold ... require moderate recent growth in earnings and long-term book value growth, and a debt ratio that isn't outrageous, and you might find several worth buying before breakout.
Pradeep,
Do you do intraday scans or doyou rely upon your nightly scans exclusively?
quiktdr
Mostly nightly scan.
Bill
There are many ways to look at it. Say if one is value oriented investor with no major investigative skill, one would just use some simple filters to chose from the list . Or wait for breakout, investigate and buy.
If someone is really skilled value investor, he can further divide the list in to three types 1 junk like biotechnology and unrecoverable cases 2 Cigarette butts 3 genuine value.
Now the third kind will be very few probably 5 to 10 in this list. That is where the rewards can be very high.
Just for grins I added Price Per Share $5-max; Volume 1-Day 4103-Max. Then I did a custom date sort for the last month. Out of 12 I came up with 2 possibilities that were growing a little, one weak. What think ye of WPL?
Because I am just playing around and really dont know what I'm doing, would you have any suggestions how this might be improved at this point in TC?
I stand amazed at Telechart's potentials as I learn how you teach it what you want done.
Thanks once again
Art
Pradeep:
I will look further at your technical approach to this. There are a few other good places to go where you can find good stocks using fundamental scans. A free example would be something like the MSN screener. I use the AAII (American Association of INdividual Investors) product which costs < $200/year for some of my scans.
There are a few ways to look at this. One is to find stocks that are still good companies but have had a rough patch and are cheap relatively to their typical historical norms, which is how a very successful friend of mind finds value stocks. Stocks like HD, AIG and others fall into that category.
Another way is to find stocks that are simply cheap relative to themselves, for instance a stock trading with a PEG ratio (price earnings to growth) that is low.
The AAII system includes simulated results that goes back many years and one of the two systems that has blown away all others is one they created to mimic what a fellow named Zweig did. This is a hybrid growth/value screen or GARP (Growth at Reasonable Price). This and a small cap system have had the best cumulative an average results.
One key, though, is that it is in my opinion, hard to trade these. You have to more "invest" in these and plan to hold them for at 6 months to 18 months, on average. With Momentum stocks activity is happening now and you just need to find a good time to jump on the train. With these stocks you sometimes have to wait and wait and wait. It's just a different mindset. I do some of both in my accounts but you need to be able to turn on and off different logic to handle it.
Mike
1 When it comes to value strategy I am not very sure as to why one should use price cut offs. Also a stocks future price growth is not a function of current price.
2 Volume cutoffs in value stocks also has same issues.
Previous response was for Art
Mike
Valid points. The ideal holding period for value stocks is 2 to 3 years.
Within value investing if you are small investor, why focus on HD and AIG, there are much better opportunities in small caps. Plus all things about float, earnings acceleration come in play in value stocks also.
I think you should read Dhando Investor by Pabrai. It is one of the better books on value investing in recent years.
It might be worth watching the values for 2-3 years and waiting on the acceleration. Sometimes they go from beain a value to being on the IBD 100 list in a year, after sitting stagnant for a long time.
A really aggressive search for the best fundamentals and beaten down status will invariably find very small cap value stocks, along with a few large caps. The AAII screener for Piotroski values is a case in point.
Mis pricing is more common on small caps than large caps. Beaten downness is very good for value stock, it indicates sellers exhaustion.
Value stock discover their value if they regain earnings power. That is why stocks like HD may not be best value stocks.
Plus the more I study value approach, more I find that it is more a personal skill. Some value managers are better at discovering value using same tools. So screener alone may not be the only answer. Good value managers are also to certain extent good market timers, so they pick the stocks at right time.
Momentum investing requires less skill.
Joel Greenblatt laid out a good value screener based on best ROC/ROA and earnings yield that doubled market averages. Might be something worth investigating...
I am new to technical analysis and always wondered how to pick the right stock and has never got an answer. Even if we choose any of the strategies you have listed it returns 20-30 (or even > 100) stocks at one time. How do we choose top 3 or 4 stocks out of these 20-30. Whenever i choose a stock out of these 20-30 somehow I feel the other stocks are going up rather than the one I bought :(
By using additional criteria like volume surge, relative linearity, closeness to recent high, number of previous breakouts, sector relative strength, EPS, and so on, you can reduce it to 1 or 2.
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