Maximizing Growth in Tech and Consumer Defensive Stocks

Unleashing the Power of Financial Metrics in Tech and Consumer Defensive Stocks

Introduction

This strategy involving Tech and Consumer defensive stocks was created by SimFin user "snwr" and named "Look Ma I'm a Value Investor". Given its promising backtesting results, we believe it's a strategy worth exploring for our SimFin community. Dive in to draw inspiration and potentially enhance your investment approach. The article was written by SimFin not by the user.

Chosen Stock Filters

Below is a screenshot of the six selected filters from the SimFin Stock Screener. The chosen filters are described in detail below.

1. Total Current Assets (TTM) > Market Cap: This filter is looking for companies whose total current assets (cash, accounts receivable, inventory, etc.) over the trailing twelve months (TTM) are greater than their market capitalization. This could indicate that the company is undervalued, as its liquid assets alone are worth more than the entire company's market value.
   

2. Closing Price > 2: This filter excludes penny stocks, which are typically more volatile and risky. By setting a minimum share price of $2, the strategy aims to focus on more stable and established companies.
   

3. Return on Assets (TTM) > 0%: This filter seeks companies that are effectively using their assets to generate profits. A positive Return on Assets (ROA) indicates that the company is profitable when considering the total assets it has at its disposal.
   

4. Piotroski F-Score (TTM) > 0: The Piotroski F-Score is a measure of a company's financial strength, based on a series of nine criteria related to profitability, leverage, liquidity, and operating efficiency. A score greater than zero suggests that the company is in a decent financial health.
   

5. Industry Classification is Technology or Consumer Defensive: This filter focuses the strategy on two specific sectors: Technology and Consumer Defensive. The Technology sector includes companies involved in the research, development, and/or distribution of technologically based goods and services. The Consumer Defensive sector includes companies that provide goods and services that people use on a daily basis, like food, beverages, and personal products. These companies tend to be less sensitive to economic cycles.
   

6. Closing Price Growth Rate (over 1 month) < Median (of all companies): This filter looks for companies whose share price growth over the past month is less than the median growth rate of all companies. This could indicate that the company's stock is currently undervalued compared to its peers.

Snapshot of Listed Stocks

Here you see a snapshot of the 14 stocks that were included into the portfolio by the chosen filters at the 3rd. August 2023.

Strategy Intent

The presented strategy built by the user "snwr" is designed to identify companies in the Technology and Consumer Defensive sectors that not only possess strong financial health but also have potential for solid growth. We believe such companies, as defined by our filters, are poised for consistent performance, making them ideal for long-term investment.

Opportunities

Companies chosen based on our filters present a well-founded balance of financial stability and growth potential. The tech sector offers the promise of innovation-driven growth, while the consumer defensive sector provides steady performance, especially during market downturns.

Risks

Like all investment strategies, the Profitable Tech strategy isn't without risks. Market volatility, rapid technology changes and increased competition are key risk factors. Therefore, continuous monitoring and periodic adjustments are essential to adapt to evolving market conditions.

Backtest Result Presentation

Here we present a screenshot the backtest result from the strategy.

Summary

The Profitable Tech Investment Strategy, called "Look Ma I'm a Value Investor" by its creator "snwr", provides a comprehensive approach to navigating the technology and consumer defensive sectors. it was created by the SimFin user "snwr". With a focus on financial stability and growth potential, it presents a balanced portfolio that aims to achieve consistent long-term gains.

The strategy was created using the Stock Screener tool from SimFin and was subjected to backtesting. Details on the quantitative criteria and the backtesting results can be viewed in detail here: https://app.simfin.com/portfolio/64cc2b186a33d26de043128d

Disclaimer: Investing in stocks involves risk of loss. Past performance does not guarantee future returns. Always consider your financial situation and, if needed, consult with a financial advisor before making an investment. The information provided herein is for educational purposes and should not be considered financial advice.