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

Chapter 19. The Follow the Leaders Screen

Imagine you had a giant Rolodex with the names and phone numbers of all of America's top bosses. Imagine, too, that all of them were willing to take your calls. Instead of relying on the opinions of outsiders when deciding whether to buy a company's shares, you could dial up the person who knows the company best. "Shoot me straight," you could say. "Are your shares a bargain at this price?"

Having chatted with a number of chief executives in the course of writing about their stocks, I'm convinced your giant Rolodex wouldn't do much for your investment results. The above question, for one thing, is always going to elicit one of two responses. The first one is "yes." The second is "I don't comment on the stock price, but..." followed by a long list of positives that amount to a "yes." The other problem with top bosses is that almost all of them in one of their former jobs sold something, and sold it well. They're too convincing. You don't want to take stock advice from someone who always says "buy" and has a knack for talking you into it.

That's what I like about stock screening. Screening software doesn't care whether a company's boss is a real go-getter. It only cares about what he or she has gone and gotten. You already have access to two things that are far more important to your stock returns than an in-person pitch from the chief executive. The first is the company's financial reports, which lay out the case without the fluff. The second ...