This is a practitioner’s post for someone looking for help to develop their own investment process, using a freely available resource: screener.in
Rule #1: Don’t f*** up
The financial newspapers have a section on them everyday – top ‘Buy’ and ‘Sell’ recommendations from brokerages. Financial news channels have a segment called something like “Top Trading Ideas for today”. During other segments, every interviewee, whether head of research at a brokerage / mutual fund house / hedge fund gets asked this question about top stock picks to invest, in India. They all oblige, with a fresh set of stocks (companies), every day, that will benefit from some overnight development, be it auto stocks with GST, export stocks with rupee devaluation, oil marketing stocks with oil price declines and so on.
Those new to investing, get swept up in the barrage of information, trying to keep up with what the “experts” say. Those who’ve been at it longer, know not to drink from the fire hydrant. If you’re a successful professional investor, you know the flurry of information is so damaging, you relocate to a different country and set clear rules of value investing for yourself.
As a broad rule, to not f*** up, Do not buy something because financial news media told you to.
While this awareness helps with the preliminary hurdle of not reacting to the whims of Mr. Market, it doesn’t solve the value investor’s problem.
If the stocks everyone is talking about are the wrong stocks given they are likely to have run up in price already, and if the right stocks are those that no one is talking about right now, how does the value investor develop his own list of stock picks?
Developing your investing “technique”
All unsuccessful investors are alike; every successful investor is successful in her own way – The Calm Investor
The first stock I ever bought was recommended to me by my father. I then added stocks from an industry sector I had worked in previously, thinking my superficial familiarity would be an advantage. But I knew this was really like a drunk man looking for his keys under the streetlight because it was too dark to look where he had actually dropped them.
What followed was the quest for the ideal process, from going top down (picking sectors then companies), going contrarian (looking for stocks at 52 week lows), even using price movements (gasp! technical analysis), to name a few. I was unable to develop any conviction in any of these methods, thus rendering me susceptible to switching back and forth, a sure recipe for disaster.
This was the time I came across the traditional investing tomes by Ben Graham – The Intelligent Investor and Security Analysis. These books provide the essential foundation of being able to think about the company behind the stock symbol, essential to be any kind of successful investor, and especially one that looks to buy low and sell high.
Books by Graham, annual letters sent to Berkshire stockholders are immensely valuable in equipping you to arrive at an opinion on the value of a given company and the pitfalls to watch out for. Taking the principles from those and applying the fantastic lessons from surgeon Atul Gawande’s The Checklist Manifesto : How to Get Things Right, I devised my checklist for evaluating potential investments; The checklist approach to investing
However, in a investment universe of thousands of companies, they do not give you the tools to know where to look to begin with.
Where / How to look
Peter Lynch’s One Up On Wall Street offered a way to think about potential investments from what you already know. Which led to this framework for thinking about buying your first stock, in the Indian market.
While the “buying what you know” framework is a great way to get started, it is limited to consumer-facing sectors, thus leaving out large parts of the investible universe. It also works mostly for companies you’ve already encountered, often, for a large part of your life.
What I felt I needed was a quick and dirty way to classify companies into the “Maybe” and the “Do not touch” pile. Only companies in the “Maybe” pile warranted further analysis and a deeper look at their business. For example, if a company’s interest payments have been increasing and account for the bulk of its pre-tax profits, as an equity holder, I have no interest joining the very back of a long line of those having a claim on the company’s earnings, irrespective of whether it is the next hot thing.
Unable to resist using catchy monikers, I called it the TCI Rapid X-Ray, outlined in a previous post with a similar theme: So many stocks, so little time – an approach to stock selection. I received a flurry of emails on this post asking to share the tool. However, the problem was this was a very manual process, involving importing financial statements into a google sheet template with formulae. However, this is an error-prone process and the output is not easily shareable. Also, when moneycontrol, the site from where I imported the financial statements changed their format, it meant having to rebuild my scoring template from scratch.
That was until I discovered the screener.in
Using screener.in to automate the TCI Rapid X-Ray
screener.in, as the name suggests, is a stock screening tool, i.e. a tool that users can use to filter stocks based on your set of metrics. Depending on your own philosophy as an investor, you can use a bunch of pre-defined screens or create your own. Users can add their own screens for public consumption. As of last count, there are 25 pre-defined screens. With an intuitive and clean interface, it is one of best screening tools for Indian markets.
But that’s not why I fell in love with the site. What blew my mind is how it let me automate my process of scoring any given company on the TCI Rapid X-Ray. Here’s how:
Entering the name of any company in the searchbox, takes you to a page with the summary about the company’s stock price performance followed by a peer comparison on key parameters and financials at quarterly and annual level. screener lets you download the financials in a neat spreadsheet by, you guessed, clicking the ‘Export to Excel’ button.
Clicking the button downloads a comprehensive amount of financial information to your computer in excel format. This should be easy to understand if you are aware of stocks and how to calculate them, however you can take full excel training courses via websites such as https://www.advantedge-training.com/excel-training/ to get you up to speed. Shown here the numbers for Voltas Ltd.
I’m guessing you’re wondering what’s the big breakthrough here? A few different sites including moneycontrol let you access financial information, maybe not as conveniently.
Assessing the viability of any one of hundreds, if not thousands of potential companies would need sifting through the financial statements, to identify weaknesses. And the time taken to do that makes the task prohibitive for most DIY investors.
This is when screener.in gets really interesting. The site allows you to customize the excel download to your own requirements. I added a new tab to the spreadsheet, to summarize and calculate the key metrics I’m interested in. I added automatic formatting, and trends to literally get the picture in a glance.
So, after a bit of fiddling about, I’m able to use the comprehensive financial data from screener.in to develop a composite picture of how strong a potential investment the company is. Not much good if I had to do that for every company I wanted to consider.
This is where screener is brilliant. I just need to upload the new customized spreadsheet to screener using the link screen below.
Now, when I export the financials for any listed company in sceener’s database, I see my newly added tab with the summary scores! See below the download for another company (Lupin), automatically populated with the TCI Rapid X-Ray tab.
There you have it. Now, when I come across the name of a company as a promising investment, before spending any time thinking about it, I open screener.in, download the customized excel report and look through the TCI Rapid X-Ray tab to decide if I want to go any further.
Email me if you’d like to utilize the TCI Rapid X-Ray template to upload to your own screener.in accounts and I’ll be happy to send it to you.
Edit (28 Aug, 2017): A newer version of the X-Ray template is available for free download here