I was trying to come up with a basic screen to identify companies that would be good candidates for some more research. Using some of the advice you provided and within limitations of my data source, this what I came up with:
(Last Close $ >= 7) - Arbitrary - no cheap stocks, likely unstable.
(Market Capitalization (mil $) >= 1000) - Not a small business
(Revenue ($ mil) - Trailing 12 Months >= 200) - Talking some real money
(Revenue Growth % - 1 Year >= 30) - High growth
(Domestic / Foreign = Domestic) - No China, sorry
(Dividend Yield % = 0) - If you grow, you don’t pay dividends
(Gross Profit Margin % - Year 1 >= 0.5) - The higher the better
(Average Daily Trading Volume >= 1000000) - This is liquid stuff
(R & D / Sales % - Year 1 >= 16) - Company is investing in future growth
(Stock Industry Group = Online Media - Industry vertical
Stock Industry Group = Application Software … continues
Stock Industry Group = Computer Hardware … continues
Stock Industry Group = Communication Services) … continues
17 stocks passed this screen:
AYX Alteryx Inc Class A
PLAN Anaplan Inc
COUP Coupa Software Inc
DOCU DocuSign Inc
FB Facebook Inc A
MDB MongoDB Inc Class A
NTNX Nutanix Inc A
OKTA Okta Inc A
PSTG Pure Storage Inc A
NOW ServiceNow Inc
SPLK Splunk Inc
TTD The Trade Desk Inc A
TWLO Twilio Inc A
WDAY Workday Inc Class A
ZEN Zendesk Inc
ZS Zscaler Inc
ZUO Zuora Inc Class A
Observations:
It is matching a lot of the portfolios out here. Is it because this is relevant screener or because it is too late already to invest in these stocks? Since many of you seem to be adding, I guess it is more the first
There are (yay) few companies I have not seen before, namely PLAN, COUP, NOW.
I would have not expected FB here
Would you relax/tighten the rules or add some other? One of the obvious downsides here is that this works for companies with at least 1 year history.
PS I read “Monday Morning Rules of The Board” twice now and I hope that this falls under “the philosophy around investing in them” (growth stocks).
Assuming this is still OT, a couple of clarifications and potential suggestions…
Clarifications:
Is revenue growth latest TTM or forecast 12 months?
Did you deliberately not want a valuation screen?
Suggestions:
I might be tempted to push GM to a 60% hurdle
I might be interested to see if latest growth is tailing off so having a look at TTM and latest Q and having a filter for too great a divergence (growth stalling)
Not sure if there’s a way to look at it but if there was a % for recurring revenues I might put in a 25% hurdle and also another filter looking for recurring revenue growth > TTM total revenue growth
I might put the SP hurdle at $5 or $10 which are accepted/research cut offs for risk/investor participation rules
If companies published deferred revenues then I would be interested to see how much companies have the next Q/year already in hand and not needing to earn it all over again from scratch.
Yes FB is I think under-rated on this board - it is the exception to the rule of large numbers (as is Ali Baba), just as Google and Amazon were for many years.
Since this is now considered OT (still not really sure why but I can live with it) I am emailing this:
revenue growth is trailing, I am not big fan of forecasts
yes, I removed valuation screen altogether. I might need to have better screen for value, but Morningstar’s quantitative valuation gives everything extremely low scores; I am still trying to figure out what the value means for these high growth companies
I might be tempted to push GM to a 60% hurdle
→ Thank you, did that
I might be interested to see if latest growth is tailing off so having a look at TTM and latest Q and having a filter for too great a divergence (growth stalling)
→ makes sense, I am not sure I can do that with the screener I have
Not sure if there’s a way to look at it but if there was a % for recurring revenues I might put in a 25% hurdle and also another filter looking for recurring revenue growth > TTM total revenue growth
→ I am afraid I will need to dig into the 10k to figure this out
I might put the SP hurdle at $5 or $10 which are accepted/research cut offs for risk/investor participation rules
→ Thank you, did that
If you’re going to set a minimum market cap of 1 billion, would it make sense to lower the minimum revenue threshold? If you compare minimums, $200 million in revenue would be unreal for a high growth stock with a market cap of only 1 billion.
Assuming this is still OT, a couple of clarifications and potential suggestions…
Yes, Tom’s screen was interesting in that it picked up a lot of our stocks, but fiddling with little adjustments in a thread on the board is definitely Off-Topic. Please bring it to a close or take it off board.