Featured Expert Kevin Matras Highlights: Acuity Brands, Celanase and Hanesbrands

Kevin Matras goes over the importance of Screening and Backtesting. Stocks in this weeks article are Acuity Brands, Inc. (NYSE: AYI), Celanase Corporation (NYSE: CE) and Hanesbrands, Inc. (NYSE: HBI). Click here for the full story exclusively on

Screen of the Week written by Kevin Matras of Zacks Investment Research:

This week, Im starting at square one and going over why screening is so crucial. Even more importantly, though, Ill cover why backtesting is the most important step of all.

Why Should I Use a Stock Screener?

Other than buying the stocks that are talked about in the media or recommended by friends, how else are you going to find stocks that meet certain fundamental characteristics?

Even if you dont use a screener now, most people do their own screening one way or another. They may hear that a stock has a certain Growth Rate, or a certain P/E Ratio or Sales Surprise, for example. They then find themselves listening for or reading about stocks that meet this criteria.

Well if you want to find stocks that meet certain criteria, you can find them quickly and easily with a stock screener.

But, just because you narrow 10,000 stocks down to a handful, doesnt necessarily mean that youve picked the best ones. You might have picked the worst ones. But how will you know?


Once youve created a screen, you can then backtest it and see how your screening strategy has performed. In other words, does your screen generally find stocks that go up once theyve been identified? Or does your screen generally find stocks that get buried once theyve been identified? This is good stuff to know.

With backtesting, you can see how successful your stock-picking strategy has performed in the past, so youll have a better idea as to what your probability of success will be in the future. Keep in mind, though, a screening and backtesting program isnt a box of magic. But it is a great way to see what works and what doesnt BEFORE you put your money at risk!

But remember, a great strategy for picking winning stocks doesnt exclude you from ever having another loser. On the contrary, even some of the best strategies only have win ratios of 70% or 80%. (NOT 100%.) If your strategy picks winners far more often than losers, though, you can feel confident that your next pick will have a high probability of success.

And dont be the guy who accidentally gets into one or two good stocks and thinks hes the next Warren Buffett. If your stock account is important to you, test your stock-picking strategies to see if your method for finding winners is a repeatable one. And thats why someone should use a Screener and a Backtester.

As usual, Ill close with a few new picks from some of my favorite backtested screening strategies for 04/29/08:

AYI Acuity Brands, Inc.
(from the Increasing cash Flows screen)
CE Celanase Corp.
(from the Upgrades and Revisions2 screen)
HBI Hanesbrands, Inc.
(from the Momentum Method1 screen)

Sign up now for your two-week free trial to the Research Wizard and take your stock screening to another level. And when youre done, backtest it to see if it works! And dont forget to check out the winning trading strategies that come loaded with the program. Know when to buy and when sell. Its all there:

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Jim Giaquinto
Phone: 312-265-9268

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