Your Next Great Stock: How to Screen the Market for Tomorrow's Top Performers

Chapter 4. Stock Screening Is the Best Way to Find Great Stocks

Stock screening is neither exotic nor new. Stripped to its core, it's simply the process of choosing among stocks using facts rather than hunches. If you're familiar with stock screening, you know that your computer plays a big role. But the computer just allows you to evaluate more stocks and more facts at the same time than you would be able to evaluate with a pencil and paper. Your success depends more on how good of a strategy you use—which clues you look for—than it does on the computer you have and which stock-screening tool you decide to use.

Smart investors, after all, have screened potential stock investments since before the creation of the World Wide Web (1989), the personal computer (1975), or even the early, outdoor predecessor to the New York Stock Exchange (1792). They've screened ever since they had more than one stock to choose from.

400-Year-Old Technology

They've had such a choice, believe it or not, for nearly four centuries. An investor in Amsterdam in 1625 might have been faced with the decision of whether to buy shares of the Dutch East India Company or the Dutch West India Company. Neither would have made its way into one of today's socially responsible mutual funds. The first was incorporated through a merger of smaller sea merchants in 1602, and granted a monopoly by the States-General of the Netherlands for colonizing, trading with, and otherwise exploiting Asia. The second, chartered in 1620, ...