The theory is over. It’s time to build your winning portfolio.
In our guide to investing styles, you identified your core strategy—be it Value, Growth, Momentum, or Dividend investing. Now, we move from theory to action. How do you actually select stocks that fit your chosen framework?
This guide provides the specific filters, metrics, and tools you need to screen and select stocks like a professional. Let’s get started.
1. Select Stocks for Value Investing
Goal: Find fundamentally strong companies trading below their true worth.
The heart of value investing is discipline. You’re a bargain hunter looking for quality merchandise that others have overlooked. This means focusing on financial health and ignoring market hype.
Filters to Apply:
- Low Price-to-Earnings (P/E) Ratio: Look for a P/E significantly below its industry average.
- Low Price-to-Book (P/B) Ratio: A P/B below 1.5 suggests you’re not overpaying for assets.
- Low Debt-to-Equity Ratio: A ratio below 0.5 indicates a financially stable company.
- High Return on Equity (ROE): An ROE above 12-15% shows the company is profitable and efficient.
- Margin of Safety: The current market price should be well below your calculated intrinsic value.
Tools to Use:
- Screener.in: Use pre-built screens like “Low PE + High ROE” or create your own custom queries.
- Tickertape & Finbox: These platforms provide intrinsic value estimations and financial health scores.
- GuruFocus: An excellent tool for deep-diving into financial history and finding undervalued stocks.
2. Select stocks for Growth Investing
Goal: Find innovative companies with explosive revenue and earnings growth potential.
Here, you’re a detective looking for the next superstar company. You prioritize rapid expansion and market dominance over a cheap price tag, betting on future potential.
Filters to Apply:
- High Revenue & EPS Growth: Seek consistent YoY revenue and earnings per share (EPS) growth of over 20%.
- High Return on Invested Capital (ROIC): An ROIC above 15% means management is effectively reinvesting capital for growth.
- Scalable Business Model: The company must have a large addressable market and a clear path to expansion.
- Strong Operating Margins: Healthy margins prove the business is profitable even as it grows.
Tools to Use:
- MarketSmith India: The go-to tool for CANSLIM-style growth screening and chart analysis.
- Tickertape: Use its ‘Growth Score’ and filter for stocks with high analyst ratings and future estimates.
- SimplyWall.st: Provides excellent visual forecasts for future revenue and earnings growth.
3. Select stocks for Momentum Investing
Goal: Identify and ride stocks that are already in a strong, confirmed uptrend.
Momentum investing is about psychology and price action. You’re not trying to find bargains; you’re looking for strength and joining the winning team. This requires technical analysis skills.
Filters to Apply:
- Price Above Key Moving Averages: The stock price should be above its 50-day and 200-day moving averages.
- High Relative Strength (RS): Look for stocks outperforming the broader market (e.g., Nifty 500).
- Volume Confirmation: Price breakouts should be accompanied by a significant increase in trading volume.
- Proximity to 52-Week High: Stocks near their all-time or 52-week highs are showing strong momentum.
Tools to Use:
- Chartink: A goldmine of pre-built technical screeners for breakouts, RSI crossovers, and more.
- TradingView: The best platform for custom charting, trendline analysis, and setting alerts.
- StockEdge: Excellent for tracking volume and delivery spikes, price strength, and sector trends.
4. Select stocks for Dividend Growth Investing
Goal: Find financially robust companies that consistently pay and increase their dividends.
This isn’t just about finding a high yield; it’s about finding a safe and growing yield. The focus is on consistency, stability, and management’s commitment to rewarding shareholders.
Filters to Apply:
- Consistent Dividend History: At least 5 consecutive years of stable or increasing dividend payments.
- Sustainable Payout Ratio: A payout ratio below 60% ensures the dividend is safe and has room to grow.
- Positive Free Cash Flow (FCF): The company must generate enough cash to cover its operations and its dividend.
- Low Debt & Stable Earnings: Financial stability is crucial for long-term dividend reliability.
Tools to Use:
- DividendData.in: A dedicated resource for tracking the dividend history of Indian companies.
- Screener.in: Filter by Dividend Yield, Payout Ratio, and 5-Year Dividend Growth.
- ValueResearchOnline: Provides reliable data on dividend history and financial health.
Summary: Key Filters by Strategy
| Strategy | Key Selection Metrics | Top Tools |
|---|---|---|
| Value | Low P/E & P/B, High ROE, Low Debt, Margin of Safety | Screener.in, Tickertape |
| Growth | High Revenue/EPS Growth (>20%), High ROIC, Scalable Model | MarketSmith, Tickertape |
| Momentum | Price > 50/200 DMA, High Relative Strength, Volume Breakouts | Chartink, TradingView |
| Dividend Growth | 5+ Yrs Dividend Growth, Payout Ratio <60%, Positive FCF | DividendData.in, Screener.in |
Pro-Tip: Blend Strategies for Better Returns
The world’s best investors rarely stick to just one style. They create powerful hybrid strategies:
GARP (Growth at a Reasonable Price): This popular blend seeks high-growth companies that haven’t become excessively expensive. It combines the vision of growth with the discipline of value.
Value + Momentum: This strategy looks for deeply undervalued stocks that are just beginning to show signs of a technical breakout, capturing them at the perfect inflection point.
Final Thoughts: From Strategy to Action
The most successful investors don’t rely on luck or hot tips; they use a systematic, repeatable process. This guide has given you the blueprint for that process. Your task now is to apply it.
Start with one strategy, get comfortable with the tools, and begin building a watchlist of companies that meet your criteria. Your journey to confident, strategic stock selection starts now.