Using Your PC to Pick Your Stocks

Using Your PC to Pick Your Stocks

Computers can’t choose stocks, but they can give you a lot more choices

Text was first published in 1994, an interesting historical text about those times gone forever

Your personal computer can be a window into the stock exchanges. You can examine current stock quotes and analysts’ reports and screen tremendous databases for any number of stock characteristics. You can even buy stock on a PC.

You don’t have to be a computer expert to use the screening techniques of Wall Street pros, but you do have to invest some time and money. The better screening programs are as easy to use as a spreadsheet or database program. Most disk-based programs cost between $100 and $800 a year. If you plan to purchase a computer for stock screening, the American Association of Individual Investors (AAII), an independent non-profit group, suggests you chose an IBM-compatible PC. Investing software for the Apple Macintosh is not as widely available and what little there is, is rapidly disappearing.

Stock screening online can be pricier, since online services, such as CompuServ, generally charge users for the time their computer is hooked up. You’d be well-advised to study your manual closely before logging on and become familiar with abbreviations for certain financial ratios.

Old computer souvenirs. Illustration by Megan Jorgensen (Elena)

The big advantage of the online screening services is timeliness. These services generally update stock prices nightly and corporate data weekly. Subscribers to disk services, however, receive financial data by mail. But users can generally get more detail from disk-based services. Besides, disk-based services can offer more flexibility and depth. Typically, online users can compare stocks in just a few dozen categories. On disk, you have greater freedom to manipulate data.

Of course, says AAII president John Markese, “screening stocks won’t make you a better investor.”

It will, however, make it easier to sift through data. A subscription to AAII’s 28-page bi-monthly newsletter on screening techniques and the latest investment-related computer developments, the Individual Investor’s Guide to computerized Investing, costs $40 per year and includes a year-end 500-page guide by the same name. Members pay $30. Membership costs $49 annually.

Choosing a stock-screening service

Stock-screening services vary widely. Some only provide raw data, while others offer complete analyse systems. In selecting which service works best for you the American Association of Individual Investors, an independent, non-profit group, suggests that you pay attention to how the service provides data, what information is provided, which computer systems can use the data, the cost, and even how the service determines what to charge for the data.

Some items on the AAII checklist:

• Take a close look at the features the service offers: Obviously the service should supply the information you are searching for, but a quick look through the grids of product descriptions will show that services vary greatly in breadth and depth. If you are a technician, than you should probably seek a service that specializes only in providing historical data for the markets you analyze. You do not want to pay for features that you will never use.
• Charges for access and data can vary greatly between services: The best way to compare two services is to determine the type of data that you are going to need and compute how much it is going to cost to obtain it.
• If you are looking for real-time data, watch out for exchange fees: Stock and securities exchanges charge individuals for access to real-time data. All real-time vendors must collect this fee, but may not mention it in their pricing lists.
• Check to see if there is a monthly minimum: If you are an infrequent user, you might be paying for data that you never use.

Screening the Stock Screening Services

Online or in your computer, here’s what the leading services have to offer:

• CompuServe: Money Magazine’s Fund, E* Trade, Quick & Reilly brokerage
• GEnie: Dow Jones News/Retrieval, Charles Schwab
• Prodigy CANSLIM: Includes a popular preset screen of seven criteria
• Reuters Money to set Network: Allows user to set price-limit triggers at which system will sound an alert
• Telescan Prosearch: Access to 500 single stocks traded worldwide
• AAII Criteria Stock: Requires 30 MB on hard-drive, twice what others require
• Morningstar’s US Equities: Allows you to customize data-base to create your own rankings
• Value/Screen III: Database of widely traded stocks, good tool for conservative investor

Mutual Fund only Screens: Morningstar, Alexander Steele’s Mutual Fund Expert: Fast and easy to use.