USING MSN TO HELP BUILD YOUR WATCH LIST
I left the following response under the Comments to the "Is Rule #1 Investing Value Investing?" post. Sebastian had asked:
...it seems quite hard to me to find businesses that actually meet the MOS criteria (and of course all other criteria you mentioned) in today's market. Maybe the likelihood of doing so gets bigger in weak years such as around 2000. Or maybe I should look for smaller companies.
A lot of you have expressed similar frustration: can wonderful companies be found on sale, available at a Margin of Safety? Here's my response to that question:
Hi Sebastian,
Good question about trouble finding MOS friendly stocks. The first thing is to find businesses you want to buy and make a list of them. This is called a Watch List because we watch these stocks and wait until we can buy them.
Warren Buffett waits years for some businesses to come his way and sometimes they never do. There should only be the Best of Breed businesses on the list. So if you have two businesses on the list that compete with each other, choose one.
Build the list so that you have 5 businesses to start. That would mean you have 5 industries that you are familiar with and comfortable with. Learn everything you can about those five businesses. In the process, you will almost inevitably get rid of one and add some other business as you learn more and more. Be patient. Buffett once quipped that sometimes his best investments were the ones he didn't make.
And remember that we are a long way from an undervalued market. This isn't 2003 or 1983 or 1972. The Dow is running right at the top of the game and that alone should make us expect that there are going to be a lot of great businesses that are also overpriced.
Do not dispair. Mr. Market has a way of being Bi-polar regularly. He will get depressed sometime, and then perhaps one of your favorites will be available at an attractive price.
But what to do meanwhile? Two choices.
- Hang out and keep trying to add another great business to your list. I have about 20 or so.
- Use Search tools to find stocks that are undervalued now and then do the rest of the evaluation to see if they are 4M businesses for you. Let's talk about #2.
MSN has a search tool that is usable. Its major merit is that it is free, but that's okay. It will get us started. Later you might want to spend a couple of thou and get onto a great search engine like Investools. But that's for later. For right now, let's see what we can do for no money.
Go to MSN Money.
On the left-side of the page, under Investing, there's a link to see More. Click on that link...
(See "More" below)
And you'll end up on this page.
See Find Stocks on the left sidebar?
Click on Power Searches. (See image to the right. )
This will take you to a window that has a bunch of pre-built searches.
Click on the search called Institutional Ownership Up Last Month. When the search comes up, ignore the stocks.
Look above the search list and you'll see a box that says "Customize this screen in our deluxe stock screener".
[Note: Firefox users may not be able to see this button. Switch to Explorer to view it.] Click that button. It'll bring you here, where you can download the MSN Money Investment Toolbox. Follow the instructions to make sure you can see the charts on your browser.
Almost done. Deep breath. You can do this!
(Some users may need to quit their browsers and/or enable cookies on their computers before seeing the stock screener as it should look.)
Once the stock screener is loaded, you'll see a little scroll bar on the top above the list of stocks. Scroll down. You will see 3 blank boxes below "% Price Change Last Month". Should look like this:
Click in the blank box on the left. You will get a drop down
screen.
Select Investment Return / ROI: 5-Year Avg.
It will put that stuff in the box.
Now go to the box to the right of that and click.
Select >=. (Same process, with a drop-down menu.)
Go the next box to the right and click in it.
Select <custom>.
Now type in 15%. Hit enter.
Okay, you're done with that one. You just told the database that, in addition to the other search criterion, you want just the businesses that have gotten ROIC of better than 15%. We're raising the bar a bit because we can't look at all of the Big Five.
Now we're going to do the same thing again, so scroll down to see a set of blank boxes.
Select Profit Margins / Net Profit: 5-Year Avg. >=
15%.
And once more, in the 1st pull-down menu: Analysts Projections / EPS Growth Next 5 Yr.
Click Run Search. You'll get about 50 stocks.
The reason I'm suggesting this search is that this search seems to turn up more stocks on my watch list than any other. Stocks like PAYX, COH, BRO, MCO, UPL, APOL, BHP, GRMN, and INFY, which gives me some confidence that there are a bunch of Rule #1 stocks on there that might be undervalued.
Of course, you must go through the 4M's, not just the last M (Margin of Safety). And especially I want you to really dig in on the first M (Meaning). Is this business in an industry that you want to learn about?
So let me know how this goes.
Now go play!
