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James Li
James Li
Articles (181)  | Author's Website |

Value Screeners Identify Top Sectors

A look at value screener record trends by sector

Since 2009, GuruFocus has implemented an eclectic variety of value screeners to help investors find good value opportunities around global stock markets. The value screeners can also offer insights on global market valuations and the predictability of companies. Additionally, we can study the value screener record trends to determine which sectors have good value potential in early 2017.

The value screener record for global companies

Based on the investing strategies implemented by Benjamin Graham, Peter Lynch, Warren Buffett (Trades, Portfolio) and Walter Schloss, the GuruFocus value screeners list global companies that offer good value to investors. Table 1 summarizes the number of companies making the value screeners grouped by region.

Value Screener

USA

Canada

UK / Ireland

Europe

Asia

Oceania

Latin America

Africa

Ben Graham Net-Net

171

71

43

244

616

27

7

9

Undervalued Predictable

48

8

18

62

30

6

24

7

Buffett-Munger

32

3

14

41

53

1

9

5

Historical Low P/S

18

0

7

28

42

1

15

1

Historical Low P/B

19

1

9

34

50

3

18

4

Peter Lynch Growth

20

5

20

70

82

4

17

12

Walter Schloss

19

8

59

67

365

17

5

5

Strong Stocks '17 version 1

15

2

6

20

7

2

6

1

Strong Stocks '17 version 2

5

1

6

11

3

1

2

0

Table 1: Value Screener Record as of Feb. 6, 2017

The high number of Ben Graham Net-Net stocks in the Asia region suggests Asian stock markets are still significantly undervalued. As illustrated in Figure 1, several Asian stock markets offer a projected annualized market return of over 15%: Singapore, Russia, China and India. The majority of Asian net-nets are in the technology sector as illustrated in Figure 2.

1486414066200.png

Figure 1

Figure 2

Predictable companies by region and sector

The GuruFocus Business Predictability Rank distinguishes the good companies from the poorer ones as it measures how consistent a company’s revenue and earnings growth has been over the past 10 years. Among the value screeners, at least four of them require a predictability rank of at least four stars: the Undervalued Predictable Screener, the Buffett-Munger Screener and the two historical low valuation screeners. A previous article discussed sports retailer Hibbett Sports Inc. (NASDAQ:HIBB), a company that made all four screeners listed above.

As illustrated in Figure 3, the consumer cyclical sector has the highest number of undervalued predictable / Buffett-Munger companies, especially in Europe and the U.S. Fifteen Asian financial services companies made the Undervalued Predictable Screener, the largest cluster of stocks from Figure 3.

Figure 3

Figure 4 details the number of predictable companies trading at historical low valuations. Across the regions, Asian companies have higher value potential, especially financial services companies. Fourteen Asian financial companies trade near historical low price-book ratios while eight trade near historical low price-sales ratios. One Chinese bank, Ping An Bank Co Ltd. (SZSE:000001) made both historical low valuation screeners as of Feb. 6, 2017.

Figure 4

As discussed in a previous article, I generated a value screener based on Lynch and Buffett’s investing strategies. Table 2 compares the value screener I explored in the article to two versions that do not use customized filters.

Strong Stocks 2017 Screener

Modified Screener 1

Modified Screener 2

Market Cap at least $500 million

Beneish M-score less than -2.22

Beneish M-score less than -2.22

Predict rank at least 4 stars

Predict rank at least 3.5 stars

Predict rank at least 4 stars

Gross margin at least 40%

Gross margin at least 40%

Gross margin at least 40%

OMG rate at least 2%

OMG rate at least 2%

OMG rate at least 2%

10y revenue growth at least 10%

5y revenue growth at least 10%

5y revenue growth at least 10%

PEGY less than 2

PEG less than 2

PEG less than 2

FCF yield at least 5%

Yacktman ROR at least 5%

Yacktman ROR at least 5%

   

Greenblatt ROC growth 5%

Table 2: All versions of the Strong Stocks 2017 Screener exclude over-the-counter stocks.

Figure 5 shows the number of stocks that made one of the two modified versions of the Strong Stocks 2017 Screener. Across the sectors, version 1 of the Screener generally produced more stocks than Version 2 did. European health care companies represent the majority of strong stocks for 2017.

Figure 5

Several U.S. companies made at least three of the “predictable value screeners,” including Hibbett, AmTrust Financial Services Inc. (NASDAQ:AFSI) and NIC Inc. (NASDAQ:EGOV). Two companies, Novo Nordisk A/S (NYSE:NVO) and Winmark Corp. (NASDAQ:WINA), made the Undervalued Predictable Screener, the Buffett-Munger Screener and the two modified versions of the Strong Stocks 2017 Screener.

See also

Premium members have access to all value screeners, including the All-in-one Guru Screener that allows you to generate screeners from over 150 predefined financial filters. As a Premium member, you can also backtest the strategy for up to three years. Premium Plus members can backtest the strategy all the way to 2006, the first year we have backtesting data. Additionally, Premium Plus members get 10 times as many Excel Add-in and API queries per month than do Premium members. If you are not a member of GuruFocus, we invite you to a free 7-day trial.

Disclosure: No positions in the stocks mentioned.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


Rating: 3.0/5 (2 votes)

Voters:

Comments

richday101
Richday101 premium member - 1 week ago

Hi James. Very interesting article and screens. Have you done any backtesting to show how your screens have performed?

James Li
James Li premium member - 1 week ago

Yes. The following backtesting results are based on the following parameters:

ScreenDate of 2006-01, rebalance every 12 months, rank by Predictabillity rank DESC and up to 20 stocks.

The all-time portfolio returns are

Strong Stocks 2017: 180.79%

Strong Stocks 2017 version 1: 150.46%

Strong Stocks 2017 version 2: 111.83%

richday101
Richday101 premium member - 6 days ago

Thanks, James. That works out to 9.8% to 7.1% per year over the 11 year period which is better than the S&P500 which had a 5.4% without dividends reinvested, and 7.5% with dividends.

Was there any survivorship bias (i.e. stocks eliminated due to bankruptcy, etc)?

The Strong Stocks Portfolio is not listed in the above portfolios list. Please may we have the link.

Strong Stocks 2017: 180.79% (9.8% per year)

Strong Stocks 2017 version 1: 150.46% (8.7% per year)

Strong Stocks 2017 version 2: 111.83% (7.1% per year)

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