Reuters Screens Can Help You Make Money
from: http://www.winninginvesting.com/multex_screens.htm


Please Note: Reuters no longer offers the features described in this article.
“Many of the stocks on that list you recommended are teetering on bankruptcy. What were you thinking?” That was the gist of many emails I received after I described Reuters’ Contrarian Opportunities stock selection screen in this space just about a year ago.
Contrarian Opportunities is one of 19 stock selection screens designed by Reuters’ director of investment research, Marc Gerstein. Reuters (investor.reuters.com) runs the 19 screens, which it calls Reuters Select, daily, and lists the stocks turned up by each screen on its site. You have to register, but there is no charge to see the lists.
Reuters tracks the performance of each screen and makes the results available, both in summary form, and month-by-month since inception.
What got everyone’s attention was that, as of August 27, 2004, the stocks picked by Gerstein’s contrarian screen had racked up an eye-popping 729% cumulative gain since its inception in January 2000. By contrast, the overall market as gauged by the S&P 500 index, had lost 17% during the same period.
While Contrarian Opportunities did the best, several other screens had produced impressive results. In fact, every one of the 19 screens had beaten the market from January 2000 through August 2004.
Time For An UpdateWith reader’s comments still on my mind, last week, I checked to see how Contrarian Opportunities and Gerstein’s other screens had fared over the past year.
As of September 9, Contrarian Opportunities still led the field, but this time with an astonishing 1349% cumulative return. By the way, Reuters computes the returns assuming that each portfolio is rebalanced monthly, meaning that a new portfolio is selected every month.
Screen Categories Gerstein divides his screens into four categories, Growth, Value, Quality, and Sentiment. The Growth and Value categories each contain five screens emulating different variations of these relatively well-known selection strategies. Contrarian Opportunities is in the value category.
The Quality category includes four screens that look for stocks with strong fundamental characteristics. The Sentiment category includes five screens that look for stocks that are “in favor” based on factors such as insider buying or analysts’ ratings.
Lesser-Known Stocks from the Sentiment category was the second best performing screen with a 337% cumulative return. A value screen, Favored Value Plays, was a close third with a 330% return.
As was the case last year, each of Gerstein’s screens has not only been profitable since inception, every screen has soundly trounced both the S&P 500 and the Nasdaq.
Lower Risk Screens Despite its off-the-chart historical returns, in my view, the Contrarian Opportunities screen is too risky for serious money. While most of Gerstein’s screens produce lists of 30 to 50 stocks, the contrarian screen turns up far fewer. In fact, when I checked last Tuesday, it only listed only two stocks. Obviously, with only a few stocks, one clunker could sink the entire portfolio.
However, Gerstein’s remaining 18 screens produce consistent market-beating results, and to me, look relatively low-risk.
Find Reuters Select screens from Reuters Investing homepage by selecting Ideas & Screening and then Reuters Select. Click on Daily Results to see the current picks for each screen.
Check Performance The best way to evaluate a screen’s suitability for your needs is to check its monthly performance under different market conditions. You can do that by selecting Performance, and then click on Performance Details for a particular screen category to download a spreadsheet showing the cumulative returns by month for each screen since inception. Scroll past the cumulative returns to see the actual monthly returns.
By the way, Reuter’s cumulative returns are index values, not percentage returns. The index values are referenced to the January 28, 2000 starting value of 100. Subtract 100 from these values to get the actual percentage returns. You don’t have to make that adjustment when you look at the individual monthly returns.
Buying equal dollar amounts of the 30 to 50 stocks typically turned up by Gerstein’s screens may not be practical for many investors.
Even if you don’t buy all the stocks, the screens are a good source for investing ideas. Also, check out Gerstein’s screen descriptions. He explains his rationale for the screen and also describes the screening criteria in detail. Reading each one is like taking an investing course.
Gerstein’s screens have produced remarkable results over the years. It’s amazing that Reuters is still giving the lists away for free.published 9/18/05