Stock Screener – How to find the best stocks to buy

Scan the stock market to generate trade ideas or find the best stocks for long-term investing

A stock screener, which is also known as stock scanner, is a piece of trading software for anyone trading stocks or investing in the stock market. Stock screeners allow short term traders to find the stocks that are likely to experience increased volatility or larger than normal price swings. And, they allow longer term traders and investors to find the stocks that are experiencing a change in trend, or changing fundamentals.

What is a stock screener?

Stock Market Quotes / Woman
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A stock screener is a filter, that allows you to start with a long list of stocks, and then eliminate those that don’t match the criteria you have selected. A scan of the stock market can be based on a single factor, or multiple factors can be used. For example, you can search for stocks that have a price earnings ratio below 15, are trading above their 200-day moving average and are members of the S&P 500 index. Or you can search for stocks with higher than normal volume, and with a 20-day moving average that has just crossed above a 50-day moving average.

What can you use a stock screener for?

Broadly speaking, you can use a stock scanner to filter stocks according to metrics based on trading data (price and volume) or fundamental data (from the balance sheet or income statement). Some screeners include other factors like index membership or analyst’s recommendations. Most traders will use a stock scanner to create a watchlist of between 5 and 20 stocks that are worthy of further research, or that can be watched more closely over the next few days or weeks. That way a stock screener can save valuable time for more thorough stock analysis.

Stock scanners are useful for short term traders and investors alike

Stock Screening Criteria
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Short term traders often look for stocks that are experiencing increased trading volume or volatility. These are likely to be the stocks that other market participants are watching, and are likely to see the biggest moves in the days to come. Sometimes these will be stocks that have recently released earnings data or are the subject of a rumour. Long term traders will look for the best stocks to buy or sell based on momentum, trend and fundamental factors.

Investors usually find the best stocks to buy by searching for companies that have strong fundamentals, but have experienced price weakness. They will then look for the stock to become oversold or for a new uptrend to begin. They use stock screeners to find stocks based on metrics like earnings growth, PE Ratio, ROI and cashflow per share.

Scanners are very useful if you have a specific niche like penny stocks or if you want to buy cheap stocks that the market may have overlooked. A stock scanner will allow you to save a lot of time by immediately eliminating the stocks that don’t fit your criteria. You’ll get a list of stocks based on rational criteria, leaving no room for psychological aspects that could affect your trading decisions.

How to use stock screeners

Trading Software / Notebook
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Stock screeners are usually intuitive and very easy to use. While some tools offer as many as 50 different factors to filter stocks, most traders will only use a handful of criteria. If you are a long term investor, you will be concerned with cash flows, profitability, valuation and dividends when looking for the best stocks to buy. It’s best to outline your strategy first, and then decide which factors to use to filter stocks. You will probably only use two to four different metrics or you can filter using one or two metrics and then rank the results using other metrics.

Even if you are investing rather than trading, once you have identified the best stocks to invest in, you can filter again using technical criteria like moving averages and oscillators to time your entry. If you are a professional trader, and you want to find the best stocks to buy or sell each day, you can look for the most actively traded stocks (high volume stocks) to generate trade ideas. If you are using a stock scanner with real time data, you can run a scan every hour or so to find stocks that have experienced moving average cross-overs on the hourly chart, or that have oscillators that have reached overbought or oversold levels. This can help you quickly identify trading ideas.

Overview of popular stock scanners

Stock Screeners / Finviz
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The following are some of the most popular stock scanners around:

Finviz

Finviz Stock Screener
Image Source: Screenshot – Finviz.com

Finviz is popular, easy to use and mostly free. It divides the criteria into three sections; descriptive, fundamental and technical. Descriptive factors include the exchange the stock is listed on, the market cap and the sector. Fundamental factors include earnings per share, return on equity and similar data. Technical factors can be used to find stocks that are above or below specific moving averages, that are oversold or overbought, or that have set up a specific pattern.

The Finviz stock scanner has a few unique filters to help traders find the top stocks to add to their watchlist or investors find the best stocks to buy. You can search for stocks that are releasing earnings within the next n days, or in the past n days. You can also eliminate illiquid stocks by only selecting stocks with an average volume of x number of shares. Traders can look for stocks where a high percentage of the float has been sold short, making them potential candidates for a short squeeze. You can read more about the features of this tool in our in-depth Finviz review.

Overall Finviz is a solid and feature-rich stock scanner which is suitable for professional traders and investors alike. The premium version of FinViz costs $25 / month and allows you to save your favourite scans or export the results of a scan. Users of Finviz Elite can also access the advanced charting features and stock correlations.

TradingView

TradingView Stock Screener
Image Source: Screenshot – TradingView.com

TradingView is a trading platform with a range of features, one of which is a real-time stock screener. The screener is a little more difficult to use, and more focussed on price action than fundamental data. However, for active traders who trade using technical analysis it is well worth the effort. The TradingView screener integrates seamlessly with other components of the platform. For example, the results of a scan can be added to a watchlist with one click, or a chart can be opened for each result.

The TradingView platform includes an active social media section which allows traders to form communities and share charts and trading ideas. You can also create alerts that trigger and send you a message when the criteria for a screen are triggered for any stock in your watchlist. If you are an active trader and like the other features of the platform, then this is the screener for you. It lacks the functionality of some other screeners, but if you can live with that, you’ll find the integration with the rest of the platform useful.

TradingView offers four plans, ranging from free to $40 / month. While these plans are quite expensive, they are for the entire platform, not just the stock screener. The free plan comes with enough features to be quite useful, but to get the most out of it, the $10 plan is recommended. The more expensive plans are for full time day traders.

Zacks

Zacks Stock Finder
Image Source: Screenshot – Zacks.com

Zacks is a well known stock market screener, with several unique features, although most of the best features are only available to premium subscribers. Zacks calculates a number of its own scores and ranks stocks accordingly. These scores and ranks can be included in screens if you have one of the premium subscriptions.

Zack’s premium subscriptions also include style scores for momentum, value and growth stocks. Investors looking for the best growth stocks, or wanting to create a dividend screener will find these useful. Zacks stock scanner is more suited to those wanting to find the best stocks to buy or sell based on fundamentals, rather than based on price action. The premium subscriptions cost $20 to $59 / month.

StockFetcher

StockFetcher Stock Screener
Image Source: Screenshot – StockFetcher.com

StockFetcher is a free stock screener focussed on technical analysis. Screens can be designed using a very wide array of technical indicators. The results of a scan can also be added to a watchlist immediately. It’s a very popular trading tool amongst day traders who use it to create very precise screens that they can run every day.

This stock screener is not as intuitive as some of the other stock scanners available. It does require some experience with technical analysis. But if you are experienced, it may well be the best stock screener for active day trading and swing trading. The free version use a delayed price feed which is fine for long term traders, but day traders will need to opt for the standard subscription for $5.95 or the advanced plan at $14.95.

ChartMill

ChartMill Stock Scanner
Image Source: Screenshot – ChartMill.com

ChartMill is a good option for those who don’t have a lot of experience in technical analysis. Investors can use pre-programmed scans to find stocks with strong technical set-ups, and then filter the list further to find undervalued stocks or other good companies to invest in.

Short term traders can use preconfigured screens that identify stocks that are setting up for a big move. The “squeeze plays” scan identifies stocks that have abnormally low volatility and may be setting up for a large move, while the trend intensity screen finds the stocks with the strongest trends. You can also save your favourite screens, so you don’t have to type everything in again each time you want to search for hot stocks. Chartmill costs $30 / month, or $260 for 12 months, which include price data delayed by 15 minutes.

CNBC

CNBC Stock Screener
Image Source: Screenshot – CNBC.com

CNBC’s stock screener is not the most comprehensive stock scanner around, but it does come with some interesting preconfigured scans. The “Solid Stocks, Solid Companies” scan lists companies that produce steady returns under most market conditions. The “S&P 500 Dogs” scan is a new twist on the “Dogs of the Dow” investment strategy which was popular in the 1990s. It lists high paying dividend stocks that have a market capitalisation of over $10 billion.

Other preconfigured screens include a dividend stock screener that includes only high-quality stocks, a small cap value screen and a large cap growth screen. The customised stock scanner is fairly limited, so this is not the best screen for advanced traders or investors. However, for those wanting a screener, that’s free and easy to use, the CNBC Stock screener will give you a list of relatively good stocks to buy.

Yahoo Finance

Yahoo Finance Screener
Image Source: Screenshot – Finance.Yahoo.com

Yahoo Finance includes a free stock finder which users can use to filter stocks from over 50 countries. The available filters are more relevant to fundamental metrics rather than price action and technical analysis. The screener is also not as easy to use as most other screeners.

The available filters are divided into share statistics, income, valuation measures and cashflow. ESG metrics are also included which is of particular relevance to those interested in ethical investing. Yahoo’s stock finder is excellent for long term investors looking for a free tool to use to find potential high performing stocks. For short term traders, there are better free tools available with more filters related to price and volume.

Uncle Stock

Uncle Stock
Image Source: Screenshot – UncleStock.com

Uncle Stock is another stock market screener that’s good for those investing in stocks, as opposed to trading stocks. It includes preconfigured screens that select stocks based on the methodologies of famous investors like Benjamin Graham, Peter Lynch and Warren Buffett. It also includes screens designed around certain themes like a dividend stock screener and a cash flow screener.

The stock screener app also includes a wide variety of tools to help investors work out valuations and price targets. In this way, it’s more just a screening tool, but a tool to help investors compare the valuations of several stocks. Besides looking for the best stocks to buy, you can use this tool to back test your investing strategies. Uncle Stock is free to use for two weeks, after which you will need to choose one of three plans prices at between $12 and $28 / month.

Conclusion: Use stock scanners to generate trade ideas

Trading Ideas
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You can see there are plenty of stock screeners available for traders and investors alike, and they vary quite a lot. If you are not going to be spending a lot of time researching stocks, then choose one of the screeners that makes sense to you immediately. You don’t want to spend time learning how to use a screener that you’ll only use for an hour or two a week. If, on the other hand, you are an active trader, then it’s worth investing the time to learn how to use the best screener for your needs. You’ll get a lot more out of it if you know it inside out.

Finally, it’s important to decide on your trading methods first, and then choose a screener and the criteria you’ll use to screen based on your methodology. It’s very easy to get side-tracked by the infinite number of factors available. But, a screener is a trading tool to help you find the right stocks. It’s not a tool to help you find a trading strategy. So, make sure you are clear on your strategy before you even start looking at screeners to scan the stock market.

What about you? Have you used one of the mentioned stock scanners already? Which tool to scan the stock market do you like most? Do you have a favourite stock market scanner that we haven’t mentioned? Please let us know your thoughts and feedback in the comments below.

About Richard Bowman
Richard Bowman is a writer, analyst and investor based in Cape Town, South Africa. He has over 18 years’ experience in asset management, stockbroking, financial media and systematic trading. Richard combines fundamental, quantitative and technical analysis with a dash of common sense.

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