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

Chapter 13. The Impatient Value Screen

Value investing is said to favor the patient. Find a company whose true worth is unrecognized by Wall Street, tuck some of its shares away, forget about them for a long time, and eventually the market will come around. Unfortunately, waiting on an unloved stock isn't as easy as it sounds. Feelings of doubt crop up, particularly as you watch other stocks do well while the one you've adopted just sits there. Sometimes the relationship becomes a begrudging one. You've already held the stock for three years now and, by golly, you're sticking with it until it makes some money.

Patience is overrated. Sure, it feels good when that stock you've stuck with for years suddenly starts to rally. But it doesn't feel nearly as good as when the same thing happens to a stock you've held for just a few weeks.

There might be a way to search for bargain stocks to hold for the next five years while adding some potential for them to pay off over the next five months. I call it the Impatient Value screen. It combines a traditional value search with a smidgen of price momentum.

Those two might sound contradictory. Value stocks, after all, are ones whose share prices have been beaten down to the point where they look attractive relative to measures of income (sales, earnings) or company worth (book value). Price momentum suggests just the opposite: a popular company whose share price is being bid higher.

In fact, the goal of any value investor isn't just to find underappreciated ...