Many of the the world’s most successful investors, like Benjamin Graham, Warren Buffett and Jim Slater, have shared their strategies quite openly in letters, books and interviews over decades. At Stockopedia we’ve studied, codified and modelled these rules in a wide range of 67 ready to go “Guru Screens”. These screens contain literally hundreds of years of combined wisdom that you can use or duplicate with ease.
Whether you are looking to research the qualifying stocks on the lists to find winners, or study the ways that financial data can be used in screen construction the Guru Screens are a goldmine for the curious or time-poor investor. Let’s dive right in and learn how to use them.
You can find the Guru Screen index by clicking Screens in Stockopedia’s navigation bar. You will see a list of screens on the index page as well as certain options to filter the results by category, guru or performance.
We have modelled 67 Guru Screens that are inspired by investing luminaries and finance academics. It’s an A-Z of investing recipes that range from Edward Altman to Martin Zweig. These individuals have devoted their lives to creating highly successful investing philosophies and it’s here that we track their effectiveness.
At first glance you’ll see the list of strategies on the page. These are ordered according to their individual performance returns over a given timeframe. By default this is set to the past six months. But you can change it by selecting any time frame from one-week to one-year using the drop-down menu at the top of the list.
Each row item in the list contains a profile image of the Guru in question, the title & description of the Screening Strategy, the performance of the screen over the relevant timeframe, and a link to the source materials on Amazon or the web.
The menu on the left-side of the page gives you options to dig deeper into the strategies. To get an easier understanding of the investment philosophy behind each strategy we categorise them according to style.
- Quality Investing The hallmarks of a high quality business tend to show up in consistently strong profitability, efficiency and financial strength. These shares can often be fully-priced, but they offer comfort to investors who prefer stability over speculation. The Buffett-Hagstrom Screen is a good example of this style of investing.
- Growth Investing Growth stocks are generally characterised as being in the early phases of their life cycles. It’s a period associated with rapid and increasing expansion in sales and earnings with still-reasonable profit margins. An example of a classic growth screen is the Jim Slater Zulu Principle Screen.
- Value Investing Value investing is one of the most popular and profitable long-term styles. It hinges on finding shares that are misunderstood and mispriced by the market and holding them until the value of those shares rises. One example of a classic value screen is Josef Piotroski’s F Score
- Bargain Investing Hunting for bargains is an extreme interpretation of value investing. It involves buying out-of-favour and potentially stricken shares in the expectation that at least some of them will recover and flourish. The classic bargain hunting style is epitomised in the Benjamin Graham Screens.
- Income Investing Dividend investing targets companies that regularly return excess cash to their shareholders. These strategies range from high yield to long-term dividend growth. Perhaps the most famous income screen is known as the Dogs of the Dow screen, popularized by Michael O'Higgins in the early 1990s.
- Momentum Investing Momentum is one of the most powerful forces in the stock market. There are strong reasons why recent trends tend to persist, whether it’s a rising share price or a company that beats forecast expectations. An example Momentum screen is the 52 Week High Screen which selects the strongest stock performers over the last year.
- Short Selling Betting that a share will fall in price, rather than rise, is anathema to many investors. Yet professional short sellers are expert company analysts. Their red flags can point to particularly risky shares that might be worth avoiding. An interesting short-selling screen is the one outlined by James Montier.
Beyond the seven broad style categories, you can navigate straight to any individual Guru’s screens by selecting it from the alphabetical list on the menu on the left-side of the page.
Rather than simply modelling the rules used by the legends of finance, we also track the daily risk and returns of these strategies, too. We build portfolios of equal weighted positions using the top 25 stocks qualifying for each Guru Screen and rebalance them quarterly. Frictional trading costs are not taken into account which allows clearer comparison of risk factors across screens.
Remember! Historical performance is not an indicator of future returns.
Want to know how different investing styles have performed over time? No problem. On our Guru Screens Performance History page you can see how the all-model Composite has performed, as well as composites for each investment style.
The qualifying lists of stocks for each screen updates daily based on price movements and fundamental changes - you can see the new stocks being added and removed every day here. However, we also track all the 60+ Guru Models available on Stockopedia as baskets. Some of these strategies may originally have been much longer-term buy-and-hold deep value strategies but - for tracking purposes at least - we rebalance all of them strictly every three months at the end of March, June, September and December.
The portfolios are checked every quarter to see which stocks are qualifying for the original screening criteria. We then sell any stocks that are no longer qualifying and replace them with stocks that are qualifying strictly according to the quantitative criteria, while reducing or increasing the position size for any stocks that are still qualifying.
All stocks become equal weighted in each portfolio at the point of each rebalancing date. Our tracked baskets are therefore snapshots of the constantly changing lists at a moment in time.
This rebalancing is done each quarter as otherwise it wouldn't be very representative if it was done more frequently (i.e. daily or weekly), given that we don't factor in frictional trading costs. This would also increase the probability of a stray data error (e.g. a stock split) impacting the results.
In the real world, this level of trading activity may still involve significant trading and tax costs for smaller investors. Our original research into the cost effectiveness of "running your own fund" found that £50,000 fully invested in 25 stocks will cost around 1.96% annually to run. You can read more about that research here.
In the next section we’ll look at what you will find on the individual Guru Screen pages.
It is important to understand in depth the risk profile and return characteristics of any Guru Screen used to uncover investment opportunities. By reading the background and browsing through the screen lists generated, you can get a good sense for the kind of companies that a screen favours and any industry/risk concentration that a given screen may generate.
When determining which screen(s) you might want to follow, it's worth asking yourself the following questions:
- Does the screening approach match my individual needs and risk tolerance?
- Is this style of investing more suited to bullish or defensive market conditions?
- How is this strategy likely to react relative to the current market environment?
- What is the proper benchmark to measure the performance of this screen (in terms of market capitalisation, industry concentration, growth vs. momentum)?
- How frequently does the list of qualifying companies change?
Most importantly, remember that screening is just the first step on a journey. There are qualitative elements (e.g. the calibre and honesty of the management team) that cannot always be captured effectively by the quantitative screening process that we describe. Detailed fundamental analysis of any stock you are considering for purchase is important for successful investing.