Jump to content

Data mining – finding cheap and un-loved stocks using IG filters

Recommended Posts

In this article I will go through a quick set of criteria, build a filter and see what comes out the other end.

 

With the FTSE100 at all time highs, let’s look through that selection (the UK 100 stocks) and try and find potential trade opportunities.

The overall index has moved up over the preceding months but how does that resonate with particular stocks.

Which have been left behind, and

Can we find any hidden gems  that may be worth further inspection?

 

To help answer these questions we will use IG’s own tools designed to help investors filter through the vast population of stocks and hone in on those that meet a set of criteria: Data mining.

 

From the classic IG trading platform, go to the ‘Research’ button and click on Market Screener (or simply click on this link for our market screener), a new tab will open.dm_screening1.JPG

 

From here the first thing I have done is clicked ‘Reset’ to clear any pre-existing filters: we have a blank canvas now.

Scroll down to the bottom of the list and you will see there are 10+ pages of stocks, this is too many to review, so let’s focus on refining that list.

dm_screening2.JPG

 

From the left-hand-side I selected the group we are interested in. In this piece I want to look at those within the overall 100 index. So I click this selector on the left-hand side under ‘Index’

dm_screening3.JPG

 

 – the screener tells us we have limited to 102 stocks (not sure why its 102, I’d expect 100, but its close enough for now)

dm_screening4.JPG

 

Now let’s dig a bit deeper. I am looking for those unloved stocks that have not benefited from the moves encountered by the FTSE over the last month or so. We click ‘Select Fundamentals’.

dm_screening5.JPG

 

First thing we’ll add is a screen to identify shares that have not moved positively in price over the last two or so months. This suggests they have not moved in step with the index through November and December '17. So I select the criteria shown

dm_screening6.JPG

 

We use the tolerance sliders to set our criteria. I want to select shares that have not realised good gains over the last 13 weeks – I set my maximum to 5% (gain) and minimum to -15% (suggests share has actually fallen in price)

dm_screening7.JPG

 

I am also going to retrieve shares that have a lowly PE rating. With the Cyclically Adjusted PE (CAPE) now standing above 30 (source: SCSW Jan-18) setting our PE ratio threshold to a maximum of 13 means we are excluding the highly rated stocks that are up on a par with the CAPE, and looking for those that are less favourably rated. Same again, 'Select fundamentals' and pick our criteria...

dm_screening8.JPG

 

Lastly, I want to obtain some form of 'comfort' in the stock I am buying. We can add in the ratio Price/Tangible Book, and this at least gives us the certainly that the stocks will be backed by some form of physical asset (store, stock, merchandise, fittings, cash etc) There is no hard-and-fast rule here, but let’s set the maximum slider to 2.5 = that is to say the stocks we are screening for will have a share price that is no more than 2.5 x tangible assets per share. The lower this value, the nearer the shares are in comparison to their book value (the assets as recognised on the balance sheet)

dm_screening9.JPG

 

Right, let’s recap.

  • We know the FTSE 100 is at an all time high, or thereabouts
  • We know CAPE sits above 30 (read this as average PE of 30 across the market)
  • We are looking for FTSE100 shares that have not risen in step with the FTSE index over the 2017 Christmas period- as we hope there will be some anomalies
  • We are looking for lowly rated shares – those not trading on high multiples, and certainly less than CAPE
  • Also we want some kind of asset backed security, so will ensure the shares are no more expensive than 2.5x the tangible asset value.

 

Our results are below. We get 7 shares returned from this screen:

  • MKS
  • SBRY
  • UU.
  • BDEV
  • 3i.
  • SSE
  • LGEN

dm_screening10.JPG

Interestingly, I have positions in two of these shares already and am betting exactly that the shares are under-rated and due a positive correction in the near term. We also talked about LGEN in another thread, where our contributor,  has an interest

 

Of these 7 there are a few things to note:

  • MKS is down 10% over the prior 13 weeks
  • SBRY is strongly asset backed at only 0.86 of its tangible asset value
  • Both 3i and SSE are on strikingly low PE ratios

 

  • I think this provides an opportunity for further investor research:
  • What PE ratios do the competitors of 3i and SSE trade on, is there a sector anomaly that could be exploited?
  • Is MKS set for an easy 10% gain in the coming weeks (results imminent for Christmas period)
  • Is SBRY offering a quick 15% trade whilst its share price is selling for less than the per share asset backing?

 

Let me know any thoughts you might have – again, this is not advice but a chance to look into some techniques for valuing unloved shares and potentially exploiting anomalies in solid FTSE100 companies..

Is this useful? 

What would you do differently?

We could follow this on and look at mining for solid dividends another time..

  • Like 1
  • Great! 2

Share this post


Link to post

Well the news is starting to flow, so we can look at our trade ideas and establish if the calls made were indeed fortuitous.

 

Today (10 Jan 18) sees the release of SBRY trading statement Q3 covering the 15 weeks to 6 January 2018.

 

My assertion was SBRY had not benefited from the overall index move in the run-up to Christmas, but it was nonetheless a quality company and I was expecting positive news.

 

https://www.investegate.co.uk/sainsbury-j--plc--sbry-/rns/third-quarter-trading-statement/201801100700034219B/

 

I quite like the way this reads - especially for a retailer in the current climate of increased competition (Aldi, Lidl on the scene), inflation and rising input costs due to exchange rate movements.

The headline reads 

'strong Christmas week, with record sales, over 340,000 online grocery orders and stellar growth in Argos Fast Track delivery and collection. Online accounted for 20% of the Group's sales during the quarter'

 

SBRY is integrating the Argos acquisition and synergies from the Argos deal seem to be driving the benefits to the bottom line. EBITDA related synergies are expected to rise to £80m-£85m, and in turn this will result in 2017/18 underlying profit to be moderately ahead of published consensus. E.G. ahead of forecasts. Note 1 of the RNS tells us: 2017/18 UPBT consensus estimate of £559m, as published on 5 January 2018 on j.sainsbury.co.uk/investors/analyst.consensus

 

If PBT is expected to be 'moderately ahead' of £559m, I'll assume 'moderate' means 4%, raising the profit target for 17/18 to £581m.

 

This resets our EPS estimate to: 26-27p and at 251p gives a PE of 9.6.


Additionally, SBRYs three-year cost savings target of £500m is on track to achieve £185m  this year, exceeding our three-year target and forecast to exceed £500m by £40m, so their could yet be more surprises to the upside for this share.

 

Thoughts?

 

So the strategy seems to be working and the RNS reiterates four key areas of the business where [we] can differentiate ourselves

 

 

 

  • Great! 1

Share this post


Link to post
Guest TinkerTrader

this is incredibly useful!

why doesn't this have a billion likes?

Share this post


Link to post

Very good point @TinkerTrader, I can only assume by the date it was posted by @rimmy2000 that it sneaked under the radar over the new year period, thanks for highlighting it and getting it back up on the board.

  • Like 1

Share this post


Link to post

You're not wrong TinkerTrader - fantastic post and something worth promoting ... so I did! You should now see this on the home pack and on the 'our picks' section. We actually asked @rimmy2000 if we could post this in MyIG which we did back in Feb I think? 

Anyway - very useful!

  • Thanks 1

Share this post


Link to post

I’m going to follow these steps and post results for companies on Monday after the open. 

Looking forward to a dividend post too :) 

great and very useful post thanks 

  • Like 1
  • Thanks 1

Share this post


Link to post
On 7/12/2018 at 5:16 PM, Guest TinkerTrader said:

this is incredibly useful!

why doesn't this have a billion likes?

Thanks @TinkerTrader. I appreciate you reading my article. I get quite busy at times, however I will create something similar soon for dividend paying ideas. With the markets undergoing (potentially) a bit of turbulence then we might want to look at stocks that provide some level of income to switch into to ride out the storm! I might get chance this week..

  • Like 1
  • Great! 1

Share this post


Link to post

@xhwu, I'm glad I posted the link to this thread for you, if you liked the OPs don't for get to give them a 'like'.

As @TinkerTrader  points out above "why doesn't this have a billion likes?"

The original 2 posts only have 3 likes between them out of some 800 views and I know for a fact I gave 2 of them. 

Share this post


Link to post

Example of a volume screener. 

@LoneStockTrader

Instead of looking for the next stock tip or subscribing to an expensive stock watchlist service, simply scan daily for stocks up on unusually high volume. Not all of those stocks will be big winners. But almost all big winners will appear in that list on the day they break out.

 

image.thumb.png.6d277ff6910f6369101c43ae1212feb7.png

Share this post


Link to post

Join the conversation

You are posting as a guest. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
You are posting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Member Statistics

    • Total Topics
      6,938
    • Total Posts
      33,027
    • Total Members
      42,825
    Newest Member
    mziadawood
    Joined 26/06/19 12:22
  • Posts

    • On another thread which @cryptotraderstarted @wjw22 commented that Bitcoin is not money. Money is something that can be transferred or used in exchange for goods and services. Bitcoin (though not widely accepted - in fact miniscule acceptance at this stage compared to FIAT) can be exchanged for goods and services in certain places across the globe.  They then go on to state that Bitcoin is not a store of value. These are just words. Since Bitcoin's inception in 2009 if you invested £1000 of your hard money into both Bitcoin and Gold then Bitcoin would have proved to be the better store of value than Gold. This is even after numerous 70% to 80% corrections! Bitcoin is not only the best performing asset in the whole world in 2019 but it is the better store of value since its inception. If @wjw22 has any evidence to support otherwise then please do provide.  They then state Bitcoin is a Ponzi and a pyramid scheme. Again these are just words. The European Commission, UK Government and many large Government and corporations are looking at Cryptocurrencies and how it can be applied in certain jurisdictions across the globe. We are at a very early stage. These things take a lot of time. Evidence from a credible source needs to be provided to support such statements as otherwise they are just words which originate from bias, ego, stubbornness, etc.  @cryptotrader, in case why you are wondering why I am not responding to your thread, it is because I want to avoid any aggressive discussions and arguments. We all have different levels of understanding and experience in this area. We all read different literature and research papers on this area. We all have different levels of knowledge in this area. Another reason is because I have done what you have a year or two ago in either this thread or the Blockchain Trilogy thread, cannot remember and it is pointless unless there are balanced arguments presented with credible evidence from credible sources.  People first compared Bitcoin to the Tulip Mania. Now that it has blasted through that people are now comparing it to the Internet boom and bust. Why must we compare it to anything? The Bitcoin boom and bust and boom again could be new future being created without any copying of past historical incidents. Future performance does not have to be based on past historical performance. From time to time new history is created that is different from the past. Bitcoin is a new asset and a new revolution which will create a new history and a new future.  Now @cryptotrader your thread was about Bitcoin specifically based on your title. Not about Cryptocurrencies in general. Yes a lot of Cryptocurrencies are junk. If Bitcoin's store of value is laughable then its store of value performance in terms of protecting capital and increase the value of the capital is astonishing when compared to Gold in the same period of time since Bitcoin's inception. Someone is buying Bitcoin hence the price is going up. A normal person does not need buy one Bitcoin at $13000. They can buy a fraction of it using FIAT money. That is the beauty. Countries like China and Russia want to end the US Dollar being the Reserve Currency. It is unlikely that the world will go back to the Gold standard. In this coming 'Digital Revolution' Bitcoin is one of the favourite to be groomed as the worlds first digital reserve currency which is not linked to any one specific country like the US. During US-North Korea, Bitcoin went up more than Gold. During US-Iran tensions, Bitcoin went up more than Gold. Therefore times are changing. People and countries do not want to store their money in something which can be manipulated by central governments and priced in US Dollars. Times are changing and power is shifting from the west to the east and countries like Japan have embraced Cryptocurrencies. I respect the views of others but what tends to happen is that if someone is negative towards Bitcoin then they highlight the negative and do not offer a balanced argument. Likewise if someone is positive towards Bitcoin then they do not highlight the negatives. Even I am guilty of that. I accept there are negatives and flaws in Bitcoin and other Crypto's.  
    • @cryptotrader wrote (in Silver Bullet thread): "I've always thought that cryptos are completely unrelated to other asset types which is why they're so difficult to price. Everything else has the inter-connectivity between themselves (Fed IR effect USD 'value', which knocks on to USD denominated assets, which leads into equities, re-positioning etc) but always thought crypto is a world unto its own. Linked to cost of production - electricity, CPU costs etc." I think the notion that crypto is something apart from the rest of the financial world is a concept that pervaded the first internet boom; the idea that the internet was going to change the nature of business and society by providing free access to everything and there for traditional business models would fail.  Instead the first internet boom failed, well hardly surprising as all those budding entrepreneurs forgot that you have to make money by charging for goods or services to become a millionaire (although a few clearly did purely off the back of selling out early enough - which is a watch out now on crypto for anyone invested for the long term).  Out of the ashes rose the second internet (or tech) boom but interestingly the winners were those that effectively adopted traditional business models (i.e. the need to make profits and generate positive cashflows - duh!).  The share prices are now massively over inflated of course but that is just financial market forces (the markets can remain irrational longer than we can remain solvent, kind of thing) rather than anything intrinsically wrong with their business models.  Now that these businesses are profitable and hold masses of cash (masses!!!) they can withstand a major downturn, perhaps better than some other more traditional sectors, and be positioned well for the eventual recovery.  It is this recover where I think we will see the really discontinuous tech disruption, the next leap forward.  This is what happened after the first internet bubble burst.  It is after the crash and clear out that we will see Crypto, or rather the blockchain type technology, become mainstream in terms of replacing physical cash, this is the end game, not some nirvana of a non FIAT collective new age hippie dippy free of politics currency (or set of currencies) that everyone will use free of government control - you might as well just howl at the moon as think that is ever going to happen. As regards you comment about Crypto being apart, well how do you buy or invest in Crypto?  With cash of course.  And how it is currently "valued" in the markets?  In USD, hmm... The real problems at present for Crypto, and the reasons it will all end in tears until the next iteration are (for me): There are too many Cryptos, until it is mainstream (i.e. the tech backing electronic FIAT currency, which is the root of the concept of currency right back to the earliest days of non precious metal currency (i.e. the right to exchange a paper bill for gold) it is the wild west. Ordinary people are not using Crypto as a currency, it does not have wide adoption It will not get wide adoption until it is better understood and backed by something normal people recognise as sound (i.e. governments) There isn't sufficient liquidity for wide adoption and consequently the price of a bitcoin is too high for a normal person to use it (similar problem with Gold BTW, which is why I prefer Silver for true disaster insurance and consequently hold physical silver coins) The price is too high and too volatile, it is in the hands of speculators - hence it is a mania The idea that Crypto is a store of value is laughable.  When the $£!& hits the fan people will buy Gold and Silver and USD and Yen, things they understand and can cling to in an uncertain world.  They will not buy bitcoin.  Even if they wanted to how can any normal person buy bitcoin at $50,000 per coin?  Barking mad the whole thing - but this is what I expect at the end of the cycle so carry..!    
    • Unfortunately i am no longer able to continue giving these updates. Alas our fun journey ends here, my fingernails are intact @Caseynotes, lol I will be here still in the forums. Thanks all for your input. DJ  
×
×