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

Chapter 23. Guru Screens

We've now looked at 11 stock screens you can run for yourself anytime. Each satisfies the five requirements of reliable stock-picking strategies set out earlier in the book. There's ample evidence that the strategies produce fat returns. There's a good explanation for why they produce those returns. The strategies have been rigorously tested for lurking variables; many of them were tested using the three-factor model to adjust their returns for the effects of volatility, value, and company size. The strategies are fairly easy to follow without sentencing yourself to sitting in front of a trading monitor all day. And finally, they fit into the language of stock screening software, albeit some more neatly than others.

You might not have recognized many of the names associated with finding these strategies. Most are applied finance types: people who alternate between developing strategies in academic settings and putting those strategies to work for investment companies. But what about the world's most renowned stock pickers, such as Warren Buffett and Peter Lynch? Where are the strategies based on their work?

There are plenty such strategies. They're called guru screens, and they're available on many of the financial Web sites whose stock screening tools we looked at earlier. Is running a guru screen a good idea? Perhaps, but there are some important things to keep in mind if you do.

First, there's no mystery to what makes a great stock picker. Great stock pickers ...