3 Simple Ways How the Yahoo! Finance Industry Browser Will Give You an Investing Advantage
I screen for stocks all the time. I have different parameters and metrics that help me find companies that are undervalued and have a great financial foundation.
One mistake that I always make, however, is using the same sets of metrics for every industry. I always end up having to go back and correct myself. It takes time and effort.
Should a farming company have the same manufacturing costs as a aerospace company? No. So screening for companies with the same metrics is a futile exercise.
Well, I found a solution that will sort out companies in different industries and save you a bunch of time. Honestly, it shouldn't have taken me over a decade into my investing experience to come across it, but, nevertheless I did and I had to share it with my readers.
Yahoo! Finance has an industry browser tool that lets you sort, compare, and examine many different industries.
I'm telling you right now that this should be a part of your screening process because it will help you see the key players in each industry and, also, help you spot out companies that are rising to prominence in the industry.
There are 3 aspects of the Yahoo! Finance Industry Browser that I believe will give you and advantage in your investing:
1. the ability to sort industries by return on equity (ROE)
One of my favorite tools on the site is the ability to sort industries by overall ROE. Basically, I can see what companies get the most return on their money after investing it back into themselves. I'll admit that ROE is a raw metric and shouldn't be relied on solely by itself, but if a whole industry is leading other industries in that category, then it is something worth looking into.
2. the ability to sort industries by dividend yield
Another metric I like to look at is the dividend yield. You can find industries that have companies that pay out high dividends.
I will hold 10 dividend paying companies in my portfolio at any given time. About 40-30% of my investing cash goes into these companies no matter the price or market conditions. I do this because dividend stocks are sturdy and provide a steady foundation for my long term growth. Those companies pay out money every quarter that I can reinvest into them for free. I cannot say no to an opportunity like that even if the shares are expensive and overpriced.
The industry browser lets me see trends in dividends within an industry and is very useful if I need to adjust my dividend stocks.
Like I mentioned before, dividend paying stocks that are leaders in an industry get a pass if they become overvalued. Usually, they are innovative enough to continue and upward growth path. This allows me to have a "hold forever" approach. An approach that I don't fully agree with, but can apply in certain situations.
If a company cuts its dividend, is no longer innovative, or does not lead in its industry, then I will have to replace that company in my dividend stock section in my portfolio. The Yahoo! Finance Industry Browser is now a key tool for my research for my dividend paying companies.
3. the ability to sort industries by Price to book value (P/b)
The rest of my stock portfolio is made of value stocks. Stocks that I deemed are undervalued and am happy to sell when they rise above fair value. I allocate anywhere from 60-70% of my investing cash into this style of investing. The percentage fluctuates because of the overall market. Usually in rising markets finding undervalued stocks is very difficult to do so my percentage go down. All in all, I have seen more growth in this style of investing than any other style.
I have tried to learn how to chart read and find stocks with momentum. I have tried to find growth stocks that have metrics that suggest of a short term surge in price. The success I have had has been scattered and inconsistent. It wasn't until I started studying Benjamin Graham, Warren Buffet, and the principles of value investing that I started make consistent profits on my investments. I have been a strict value investor for 6 years now.
The industry screener has a tool where I can sort by price to book value. Basically, it's telling me what industry is selling shares closer to its book value. If the P/B value is < 1 it could mean there are undervalued companies in that industry.
Like the ROE metric, P/B is far less than perfect. I use it more to guide my search. You should definitely check to see if a company is undervalued, not just rely on P/B ratio.
Those are my favorite aspects of the Yahoo! Finance Industry Browser.
Go try it out. Link below.