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Ciphering Made Plain
Our database consists of a universe of stocks that have been added over time.
In order to be added to the database, stocks must have the following qualities:
- Price is at least $6.00 (though stocks as low as $2.00 are included if price/volume action is compelling. Note that stocks between $2 and $6 are ranked in a special way)
- Average daily volume (50-day exponential moving average) is at least 40,000 shares per day
- Shares outstanding is no more than 150 million shares
- The float (shares outstanding less those held by insiders) is no more than 100 million shares
- Five-year estimated growth rate is at least 15%/year (if an estimate exists). Sometimes 10%/year is allowed
if the future short-term rates are compelling.
Every so often, housecleaning is done to eliminate stocks that have strayed (and remained) outside
these parameters or have exhibited especially poor long-term performance, both technically and fundamentally.
The criteria above help to keep the size of the database down to managable levels (about 1000 stocks),
but they are also in place for other reasons. For example, the shares outstanding
and float maximums are in place for the reasons of supply and demand. If there is a high level of
demand for a stock by investors who wish to buy it and a low level of supply of shares,
then that will tend to push up the price of a stock significantly and quickly. You won't
find companies the size of General Electric or Microsoft in our stock screens, because they
are so huge and require such an enormous amount of buying to budge them. At the same time, the daily
volume minimum attempts to eliminate stocks that trade too thinly.
Certain aspects of price/volume movements are important in finding the most
promising stocks. Some are straightforward and others are technical and
complicated to cipher and calculate. We take care of the technical and complicated
aspects so that you can concentrate on finding great companies from our
stock screens.
But we urge you to read more on the technical analysis indicators that we use so
that you can have a deeper understanding on how and why the screens are developed.
Please browse through the links in the Ciphering Made Plain section on the navigation
bar at the left for more discussion of these indicators. Those will give you some
background understanding of what we do so that you can look at...
Descriptions of our stock screens...
Samples of our stock screens...
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