I am a member of AAII (American Association of Individual Investors) and one of their more popular screens is the Shadow Stock Screen. I conduct a close replication of this screen on a monthly basis. This is a very simple screen that seeks out small/microcap value stocks. The screen criteria I use within stockscreen123 are:
- No over-the-counter stocks
- No financial stocks
- Market cap > $20 Million and < $200 million
- Previous EBITDA quarter and trailing twelve months are positive
- Share price > $1
- Price/book < .80
- Price/sales < 1.2
- Top 10 stocks are selected based on highest 52 week returns
- Minimum average daily volume > 5k shares
This is the ninth month of performing the screen. Decembers results averaged 12.29% for the 10 stocks, led by Silverleaf Resorts’ (SVLF) return of over 38% in 4 weeks and Fuwei Films (FFHL) 34% 4 week return (returns are hypothetical and exclude commissions and taxes, free trades are always one option to avoid commissions). The most recent month this strategy returned an average of 19.22% in four weeks. As I have repeatedly stated this strategy tends to be high beta - it performs very well in bullish markets and may underperform in bear markets. Clearly, it has been very profitable in recent months as equity markets continue to rise.
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One option is to abandon this type of strategy or move to cash when an underlying index such as the Russell 2000 is trading below a long term moving average such as the 200 day moving average. Currently the Russell 2000 is above its 200 day moving average. Another consideration is to hedge the strategy by shorting a small cap ETF or purchasing an inverse small cap ETF.
| Ticker | Name | Trend | Rank | MktCap | Pr2 Sales TTM | Pr2 Book Q | EBITDA TTM | EBITDA Q | Pr52W %Chg |
| ABL | American Biltrite Inc. | Here | 98.85 | 24.78 | 0.11 | 0.52 | 3.18 | 1.79 | 236.45 |
| SVLF | Silverleaf Resorts, Inc. | Here | 98.4 | 93.29 | 0.41 | 0.45 | 53.93 | 13.71 | 208.75 |
| GFN | General Finance Corporation | Here | 97.35 | 67.36 | 0.4 | 0.61 | 25.67 | 9.2 | 167.05 |
| COBR | Cobra Electronics Corporation | Here | 88.26 | 25.17 | 0.23 | 0.77 | 4.46 | 1.73 | 81.78 |
| BSET | Bassett Furniture Industries | Here | 82.46 | 84.33 | 0.36 | 0.79 | 1.77 | 2.83 | 62 |
| HAST | Hastings Entertainment, Inc. | Here | 80.13 | 54.93 | 0.1 | 0.54 | 39.02 | 2.01 | 57.18 |
| MDH | MHI Hospitality Corporation | Here | 78.6 | 27.48 | 0.36 | 0.69 | 14 | 3.64 | 54 |
| SURW | SureWest Communications | Here | 74.21 | 175.73 | 0.73 | 0.65 | 74.69 | 20.7 | 46.41 |
| SGMA | SigmaTron International | Here | 70.45 | 32.5 | 0.23 | 0.66 | 9.85 | 2.62 | 41.2 |
| TGX | Theragenics Corporation | Here | 69.38 | 62.23 | 0.76 | 0.78 | 11.09 | 2.28 | 40.15 |
The current top 10 stocks are also below. FFHL, which had been a stellar performer in recent months on the list, returning nearly 29% last month alone, is no longer on this months list. I update the screen once per month on my site and track the results for free on the right hand side of the site. Full results for all months can be viewed on the right side of Scott’s Investments under “Micro Value Screen”. The tool used for the screen is stockscreen123. No positions in stocks mentioned
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