In August and in September, I had presented a screen to find fundamentally good stocks that a trader may want to consider. 

 Interestingly no stock made it to this list in October, which was a particularly bad month for the markets.  November is a bit better than October. While 9 made it to the list in September, only 3 have made the list when I ran the screen today.

The methodology

With more than 4000+ listed companies, how can I create a short list of stocks which are showing a positive trend even in this difficult market? 

As a student of fundamental analysis, I always try to add a fundamental angle to any investing process. So, I have reframed the above question:

What are the fundamentally sound stocks that are showing not only a price trend but also a positive financial trend?

One of the tools that we offer our subscribers is a family of stock screeners. A screener can help you narrow down your search based on this or many such investment themes.

I have chosen companies which satisfy the following criteria: (the one change from the previous two pieces is that I now have taken results declared in the September Quarter instead of June Quarter)

• Announced results for the September 2018 quarter: Which meant I had the latest earnings information in hand, and would not be subject to a shift in perception based on earnings in the next few weeks.
• Weekly MACD is Bullish or Mildly Bullish: Moving average convergence divergence (MACD), is a momentum indicator which is a standard indicator of the trend. The Weekly MACD is calculated by subtracting the 26-week exponential moving average (EMA) from the 12-week EMA.
• Positive Financial Trends in the Sepetember 2018 quarter:That told me that the company had financial momentum – and was improving its financial performance. Financial trend is a pre-analysed parameter. Our methodology analyses the latest financials of the company across multiple parameters and runs over 200 algorithms on each set of financial results including quarterly results, profit and loss account, balance sheet, cash flow statement and shareholding pattern.
• The stock has to have at least a 20% return Year Till Date and a positive return in the last one Month: This tells me that the market is taking notice of the Positive trend.
• Quality is Good or Excellent: While for Trading the Quality may be a less important variable, but in case the trade goes wrong, the downside can be protected when you buy a Good Quality stock.
• Valuation is Very Attractive, Attractive or Fair: Valuation is even less important in the short term, but again the argument for leaving out stocks which are expensive or risky is along the same lines as why I have considered Quality.
• Market Cap has to be greater than Rs. 5000 cr: In general very small stocks are not great for trading as their risk return is too high, thus I have only looked at stocks which are Large and Mid caps.

The above list is a great starting point to do more work on each of these companies. 

You could also set up your own filters and make your own lists and then choose stocks. But most importantly – if you are a Trader and you have a tip or someone has recommended a stock to you for trading – then it’s crucial that you research it on Marketsmojo before taking the plunge. You should check out its scores as well as where the Company stands versus peers. The data will help you take a more confident decision, and also make you aware of the risks involved, especially if the company has a poor quality or financial trend. Marketsmojo can help you come to a higher quality decision. 

Also Note:

Screeners can analyze thousands of stocks in seconds a process which would otherwise require a lot of time and a large team of analysts. A Screener is far more efficient than digesting every piece of available information.

To add to this, stock screens take away the biases and emotions that all of us face hindering out stock selection process. Once you have designed a stock screen model that works for you, you can regularly check which stocks meet the criteria, with a single click.

PS: If you relax the criteria for Valuation, the number of stocks goes up to 4. Maybe you can find some more ideas that resonate with you. Why don’t you check it out here!