I’ve been having a play with some of the pre-populated stock screens on financial website Stockopedia, in the hope of finding some ideas for companies to research for future articles in Shares. One screen, in particular, caught my attention as it flags some interesting names in the small cap space.

Stockopedia has a screen called ‘Tiny Titans’ which has outperformed the FTSE 100 over the past six, 12 and 24 months. This screen is a small cap momentum investing strategy based on a system by US fund manager James O’Shaughnessy.

Stock screeners can be useful ways to filter the market. They apply a series of rules to find specific types of stocks, similar to the way smart beta exchange-traded funds uses rules to track certain indices like sustainable dividend payers.

Many ETFs will give you an overview of their rules but don’t explicitly state the exact criteria for finding stocks. In contrast, Stockopedia publishes its rules line by line, enabling you to understand how it goes about finding stocks. This also gives you information on where to make any personal adjustments, such as if you want to widen the net to include bigger market cap sizes.

The downside to portfolios that appear on stock screeners is the need to buy each company individually, thus racking up large trading fees. In comparison, an ETF is a ready-made basket of stocks. You only pay a single transaction cost and an ongoing annual management fee which is likely to be fairly low.

What is the criteria to be a 'Tiny Titan"?

The Tiny Titans screen looks for companies valued between £15m and £150m. Qualifying companies need to trade on less than 1.0 times price to sales and be fairly liquid; the bid/offer spread needs to be less than 1,000 basis points. They must also have matched or outperformed the FTSE 100 over the past year.

O’Shaughnessy’s strategy had a real average annual return of nearly 19% between 1951 and 2004, although there were periods of high volatility, claims Stockopedia.

Stockopedia’s Tiny Titans screen has 25 qualifying names which are then equally weighted in a portfolio and rebalanced every three months. This portfolio is up 32.1% over the past year and 57.1% over the past two years.

Who is in the portfolio?

Five stocks are in the mining sector, eight are industrial stocks. The rest are spread across a range of sectors including utilities, technology and healthcare. Two examples are Shanta Gold (SHG:AIM) and Swallowfield (SWL:AIM).

Shanta is a Tanzania-based gold producer. Its shares are up 32% over the past year. The miner published a very good bit of news last week in the form of maiden drill results from a satellite deposit 12 kilometres from its New Luika operating mine.

The drill results showed high grades of gold fairly close to surface, which bodes well for having a new source of ore and extending the life of processing operations at New Luika.

Swallowfield makes beauty products and its shares are up just shy of 100% over the past 12 months. Half year results in February 2017 were ahead of expectations and shareholders were treated to a 112% increase in the first half dividend.

We’d love to hear from readers who regularly use stock screeners to support their investing. Why not drop us a line at yourviews@sharesmagazine.co.uk and tell us your favourite screens and the type of results you’ve enjoyed. We may do a feature on screens if we have enough interesting ideas. (DC)

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