While bullish momentum has slowed somewhat behind global stock markets in recent months—stocks have moved sideways since early April—investors with equity positions are broadly having another good year. The S&P 500 is up nearly 11% year to date on a total return basis, as is the MSCI EAFE. Value is outpacing growth by a wide margin thus far, with the Russell 2000 Value up 25%, compared with a 1% gain for the Russell 2000 Growth.1
In terms of stock market volatility, that has been trending lower since the most recent peak on March 20, 2020 (see Volatility has subsided since the early days of the COVID-19 pandemic chart). Moreover, it's been more than 240 calendar days since the S&P 500 had a daily decline of more than 5%—as compared with the average of 177 days between all pullbacks, corrections, and bear markets since 1945.2
Of course, volatility could strike at any time, but markets appear to have broadly stabilized as COVID-19 cases trend lower and the vaccination rollout continues.
If part of your investing plan is to periodically evaluate new ideas, you might consider a stock screener to search the market for opportunities to help you build a diversified portfolio that aligns with your goals. Here are 3 stock screens using Fidelity's Stock Screener, plus top results for each.
If you think the momentum behind value stocks will continue this year, there are a variety of screen filters you can use to find opportunities in this category. For example, price-to-earnings (P/E) can be used to determine whether a stock is overvalued, fairly valued, or undervalued. Generally, a lower P/E indicates a stock is trading at a lower multiple of recent or near future earnings, either relative to its own history or to other stocks. Some investors infer that a stock with a lower P/E is attractively priced relative to stocks with a higher P/E.
Of course, it's important to recognize that a stock can have a depressed P/E because of lower expectations. For this reason, adding additional filters to a value screen may help improve the output. A metric like PEG (P/E growth) ratio, which measures the relationship between the P/E ratio and the projected earnings growth of a company, can provide additional insights as to the growth prospects of a company.
Here are the top 10 results of a screen for stocks or depository receipts with a market cap of at least $6.86 billion, a "very low" P/E ratio of 11.27 or lower, and a "very low" PEG ratio of 1.16 or lower (sorted by largest market cap), as of May 27, 2021:
- Citigroup (C)
- Toronto-Dominion Bank (TD)
- Goldman Sachs (GS)
- Vale SA (VALE)
- Cigna (CI)
- General Motors (GM)
- China Petroleum & Chemical (SNP)
- Thomson Reuters (TRI)
- Banco Bilbao Vizcaya Argentaria (BBVA)
- KKR (KKR)
Whenever you run a screen, it's important to evaluate the quality of your results. When screening for stocks using value as a primary objective, it's important to consider why a stock may appear expensive or cheap based on certain valuation metrics. You should also evaluate any other factors that may be important. For example, this screen produces several depository receipts, which carry unique risks related to international investments.
Of course, value outperforming growth thus far this year doesn't mean it will continue to do so. If you think growth stocks might take the lead as we head into summer, there are a variety of growth filters you can use in a stock screener to search for opportunities. These include earnings per share (EPS) growth, revenue growth, sales growth, and cash flow growth.
Here are the top 10 results of a screen for stocks or depository receipts with a market cap of at least $6.86 billion, a "high" forward EPS long-term growth (3 to 5 years) of at least 18.52%, and a "very high" cash flow growth rate (3 years) of at least 61.67% (sorted by largest market cap), as of May 27, 2021:
- Tesla (TSLA)
- Netflix (NFLX)
- Shopify (SHOP)
- JD.com (JD)
- Advanced Micro Devices (AMD)
- ServiceNow (NOW)
- Square (SQ)
- Atlassian (TEAM)
- Align Technology (ALGN)
- Schlumberger (SLB)
Like the previous list, this includes an international company. It also includes a number of technology companies as well as an oil field services company. If you were considering these opportunities, you should understand how their sector exposure may impact your overall investment mix.
Value and growth
You can run screens using filters that combine several objectives, such as both value and growth. And if you want to get started building a list with the help of a preset expert screen, those can be found on Fidelity.com as well.
The "Something for Everyone" screen from Zacks Investment Research, a third-party independent research provider, attempts to find companies that have demonstrated strong earnings growth that also trade at low P/E multiples. Specifically, this screen searches for companies that have the best 5-year historical growth rates (higher than 80% of all other stocks with a Zacks Buy Recommendation) and lowest P/E ratios (lower than 80% of all stocks with a Zacks Buy Recommendation). This screen focuses on stocks trading at more than $5 per share and have a 10-day average share volume of 50,000 shares or more.
Here are the top 10 results of this screen, sorted by largest market capitalization, as of May 27, 2021:
- Sanofi (SNY)
- Cigna (CI)
- Progressive (PGR)
- Allstate (ALL)
- Manulife Financial (MFC)
- D.R. Horton (DHI)
- KKR (KKR)
- Laboratory Corp of America (LH)
- Celanese (CE)
- Bio-Rad Laboratories (BIO)
Remember, when you run a preset screen, you should thoroughly evaluate both the screening criteria as well as the results. You can add additional features to any preset expert screen to focus further on your specific objectives.
With any stock screen strategy, more research is needed to determine if any of these investments are right for you. You should fully understand the risks involved, and each investing opportunity should be considered within the context of a well-diversified investment strategy that conforms to your specific time horizon, objectives, and risk parameters.