A stock screener is a tool that helps investors and traders find stocks that meet their criteria by filtering through thousands of securities according to the investor’s own criteria. Stock screeners use fundamental and technical analysis to sort stocks based on metrics like market capitalisation, analyst recommendations, P/E and dividend yield.

Why Use a Stock Screener?

Selecting stocks to add to your portfolio is not easy. There are so many stocks, on many different markets, and the volume of data about the companies can be overwhelming. That means zeroing in on a good stock is hard work.

A stock screener is an effective filter that cuts through that mountain of data. You define your search criteria, and the screener will list the stocks that meet your requirements; keep refining the search until you end up with a short list of suitable stocks.

Using Stock Screeners With An Investment Strategy

Before using a stock screener, a trader or investor needs to decide on an investment strategy, which will inform the criteria they use when choosing assets to buy.

There are a number of different ways to trade, and which one you choose will depend on whether you plan to be a long-term investor, or a short-term trader.

Here are some of the commonly used investment strategies:

Investing Strategies	Trading Strategies
Value: analysing a company’s fundamentals to identify stocks which are under-valued.	Day trading: buying and selling assets within the same trading day.
Income: investing in companies that pay dividends.	Momentum: buying assets that are rising and selling them at their peak.
Contrarian: going against market trends by investing in unpopular companies.	Swing: buying and holding for a short period (a few days or months) to take advantage of short-term price movements.
Growth: selecting companies that are expected to grow at an above-average rate.	Range: buying and selling within a price range for stocks.

How Stock Screeners Work

Stock screeners can be used by long-term investors and by short-term traders.

Stock screeners for long-term investors

There are approximately 1,720 companies listed on the London Stock Exchange, far too many for any investor to examine individually. Looking at the complete list can cause choice paralysis! So before deciding which stocks to buy, a stock screener will help you winnow through the list to find companies that fit your criteria.

Some questions when looking at stocks might be:

• The company’s market cap.
• Dividend yield.
• P/E ratio.
• Pre-tax profits.
• Price to sales ratio.

There are many more!

Stock screeners for traders

Traders, particularly day traders, need to make fast decisions so a stock screener (or scanner) which provides real-time data and generates alerts when conditions change is vital. Some of the information provided is:

• Price movements.
• Volume spikes.
• Breaking news.
• Pre-market and after-hours trading information.

Where to Find Stock Screeners

ADVFN provides a number of ways to filter the information available about companies.

FilterX

The FilterX tool allows you to set a large number of criteria when looking at companies on the LSE. You can add as many different conditions as you want to hone in on companies that match your investment strategy.

To use FilterX you choose from all kinds of data points about a company, including key figures, fundamentals and financial ratios, then set the range you are interested in. This results in a list of the companies that fit your criteria.

You can save your filters so when you come back later you can run a search using the same criteria.

FilterX is free to use but you need to have an ADVFN account.

ADVFN’S AI

ADVFN’S AI (Artificial Intelligence) is a chatbot that simulates conversation with users. You ask the AI a question using standard English, by typing into the input box, and it responds with an answer to your question. You can ask the AI to further refine its answer. You can ask the AI questions about specific companies or sectors, ask it to filter on various criteria, and summarise market conditions.

To use ADVFN’s AI as a stock screener you can start by asking for a list of companies on a specific market that meet your criteria. Here’s an example:

Provide a list of companies on the LSE with a market cap of over 1 billion and a P/E ratio between 10 and 20

This results in a list of the companies that match those parameters. You can ask the AI to further filter the list with some more criteria – it remembers what it just told you so can build on its response.

Once you have a list of companies you are happy with, you can click on a company name to go to its share price page.

You can return to previous conversations you had with the AI and ask it to run the same filters.

The AI is free to use but you need to have an ADVFN account.

Brokers and Trading Platforms

Your brokerage website or trading platform may provide a stock screener or scanner you can use to help inform your investing and trading decisions.

Advantages of Using a Stock Screener

• By automating the screening process, investors can quickly generate a list of stocks that meet their pre-defined criteria.
• The risk of overlooking viable investment prospects is reduced.
• By using objective criteria when selecting stocks, emotional biases are eliminated because choices are made solely using quantitative data.
• Stock screeners allow the investor to compare metrics for many different companies in real time.

Disadvantages of Using a Stock Screener

• Stock screeners focus on numerical data but do not take any account of market sentiment.
• They cannot look at qualitative factors that may affect a company’s performance, such as customer satisfaction, pending lawsuits, or labour disputes.
• There is a potential bias in the way that they are programmed, meaning that given the same criteria different stock screeners may come up with different results.
• The database may not be updated in a timely manner, so your search results could be out of date.
• Stock screeners cannot take account of black swan events, such as the 2008 financial crisis or the Covid-19 pandemic.

Remember that the results from a stock screener should be the first step in your investment decisions, and you should do your own research as well.

FAQs

1. How do stock screeners work?

Stock screeners use a large database of stocks, to which you apply filters so that only companies that meet your selected criteria are displayed.

2. Can stock screeners predict the performance of a stock?

No, stock screeners cannot predict stock performance; they are simply a tool to help identify stocks that meet specified criteria.

3. Can I create custom filters in a stock screener?

Yes, many stock screeners allow you to create and save custom filters so you can tailor the results to specific investment strategies – for example, ADVFN’s FilterX.

4. Can beginners use stock screeners?

Yes, definitely. The large number of companies on a market can be overwhelming, and using a stock screener is a great way for beginners to focus on specific stocks that meet their investment criteria.

5. Are stock screeners free to use?

Many stock screeners are free, such as ADVFN’s FilterX or AI chatbot. There are also premium versions on brokerage and trading platforms which provide more advanced filtering options and real-time data.

The information provided in this article is for informational purposes only and should not be construed as financial, investment, or professional advice. The views expressed are those of the author and do not necessarily reflect the opinions or recommendations of any organizations or individuals mentioned. Always consult with a qualified financial advisor or other professionals before making any financial decisions. The author and publisher are not responsible for any actions taken based on the content provided.