The advantage of this is that we can reduce the amount of time required to research undervalued companies.
Today, I will guide you through the process of setting up ADVFN to screen for companies meeting the Graham/Schloss criteria.
Using ADVFN To Find Companies based on the Graham/Schloss Criteria
To recap, our criteria to screen for potential companies to invest in are as follows:
- Price should be less than tangible book value
- Debt to equity ratio must be 100% or less
- The P/E ratio must be nine or less
- Current ratio of at least 1.50
- The company must be paying a dividend
- There must be a positive EPS growth rate compounded over the last five years
To begin inputting these criteria into ADVFN you will need to select either ‘UK Screener’, ‘US Screener’ or ‘CA Screener’ * from the charts and research drop down menu as shown below:
* ADVFN only allow users to apply this screener to UK, US and Canadian companies.
For today’s post, I have chosen the US screener although the method for inputting the criteria into the UK and Canadian screeners are the same. The next screen you will see is the following and you need to choose ‘start screener’:
If you look at the above image carefully you will notice that ADVFN will screen for US companies listed on the New York Stock Exchange, NASDAQ and The American Stock Exchange.
The next screen you will see will be the one on which you can input the Graham/Schloss criteria. There are two parts to this process. The first is to add the Graham/Schloss criteria to your screener and then add corresponding constraints:
- P/E Ratio
- Price/tangible book ratio
- Debt to equity ratio (gearing ratio)
- Current ratio
- Dividend yield
- Basic EPS 5 year % change
To add the P/E ratio criteria you need to click on the drop down menu for deeper analysis as shown in the screen shot below.
As you can see I have added all the Graham/Schloss criteria to this screen using the deeper analysis drop down menu for current ratio, gearing ratio, current dividend yield and the price to tangible book ratio.
I used the identification and quote information drop down menu to add close price (latest) and the income statement drop down menu to add basic EPS 5 year % change. Once you have added these criteria, click save this screen before moving on.
I have added the latest price information so I can see at a glance how much each companies shares are once they stack up against the Graham/Schloss criteria.
The second part of the process is to add the constraints to each criteria. For example, we only want the screener to show companies that have a P/E ratio of nine or less. The way to do this is to click on any one of the numbers in the P/E ratio column as shown in the screen shot below:
The next screen you will see is the one below in which you will need to tick the box next to exclude PE Ratio greater than and then enter the number 9.01 and then click submit:
Once you click the submit button, the screener will now only return companies that have a PE ratio of 9 or less. You will need to enter the constraints for the remaining criteria using the same process. Remember, always tick the box and press submit. Once you have finished, save the screener other wise you will lose the constraints that you enter.
Below is a screen shot of what my ADVFN screener looks like for all the Graham/Schloss criteria and their constraints so that you can compare yours to see if you have entered them all correctly:
Once all of the criteria have their constraints added to them as well, then you are ready to use the screener which should only be showing you a list of companies that meet the Graham/Schloss criteria.
This has been an epic post as compared to part1.
Maybe you read it all in one go. Maybe you tackled it in chunks. However you did it, I’d like to say a huge congratulations for getting this far.The fact that you did means that you are serious about your investing.
You understand that there is no such thing as a free lunch and it takes old fashioned hard work to achieve results.
Before we come to an end, I would like to state that this method is not a holy grail. It will not provide you with riches and make you a millionaire. But I think you already know this.
What it will do for you is provide you with a list of potential companies from which you can make investments in. It reduces the amount of time you need to take to research companies. The service from ADVFN is also free.
Impoartantly, Ben Graham advised new investors to paper trade for at least 12 months before committing any real money to the stock market. That way, you are able to practice, make mistakes and refine your skills without incurring an actual loss.
The portfolio function on ADVFN can help you with this.
Have fun with the Graham/Schloss criteria and thank you for taking the time to read The Shares And Stock Markets Blog.