6 ChartMill Trading ideas you can use to look for undervalued stocks

Fears of a real recession have increased significantly following the latest labor market data indicating a weakening of the U.S. economy.

According to the rule of thumb of Claudia Sahm, a former economist at the Federal Reserve, (which states that a recession occurs when the quarterly average U.S. unemployment rate is half a percentage point above its lowest level in the past 12 months. ) in fact, the recession is already a reality.

Meanwhile, global equity markets remain under pressure as investors seek safety in government bonds and gold. That in turn presents opportunities for the value investor who can use the current price declines to pick up quality holdings at lower prices.

Below are 5 ChartMill Trading ideas you can use to look for undervalued stocks:

Valuation Screens - Undervalued Stocks

The Decent Value Stocks screen is a Fundamental (FA) screen which will filter for stocks with a good fundamental valuation, while still showing decent profitability, health and growth.

Basic Screen Settings: minimum price $5, minimum trading volume 500.000 (300.000 for EU only), at least small caps

• Direct link to US Results only
• Direct Link to EU Results only

Valuation Screens - Decent Value Stocks

This screen provides a selection of stocks that may be of interest to the value investor. Be sure to read the accompanying article for more detailed explanations regarding the use of the filters.

Full article: How to find the best value stocks?

Basic Screen Settings: minimum price $5, minimum trading volume 500.000 (300.000 for EU only), at least small caps

• Direct link to US Results only
• Direct Link to EU Results only

Valuation/Quality Screens - Undervalued Stocks with High Piotroski F-score

This screen lists stocks with a high Piotroski F-score (8 or 9), while having a low Price/Book value and a good ChartMill valuation rating. So we are looking for quality companies which are undervalued.

Basic Screen Settings: minimum price $5, minimum trading volume 500.000 (300.000 for EU only), at least small caps

• Direct link to US Results only
• Direct Link to EU Results only

Peter Lynch Strategy

The Peter Lynch Strategy is a long term investing strategy, combining growth and value: finding decent stocks which are able to grow to hold for the long term, while not overpaying.

Full article: Peter Lynch Investment Strategy in the stock screener

Basic Screen Settings: minimum price $5, minimum trading volume 500.000 (300.000 for EU only), at least small caps

• Direct link to US Results only
• Direct Link to EU Results only

James O’Shaughnessy: Tiny Titans

An implementation of the 'Tiny Titans' screen by James O’Shaughnessy, as published in the book "Predicting the Markets of Tomorrow". The screen finds micro cap stocks with a low Price/Sales ratio and sorts them by relative strength.

Full article: Tiny Titans, an O’Shaughnessy microcap stock screener

Basic Screen Settings: minimum price $2, minimum trading volume 300.000 (200.000 for EU only), micro caps only

• Direct link to US Results only
• Direct Link to EU Results only

The Zulu Principle by Jim Slater

Making Extraordinary Profits from Ordinary Shares with a Combination of Fundamental Growth and Value Screening Filters. Slater emphasizes the importance of preparation and finding a market niche that is under-exploited by professionals, such as small dynamic growth shares.

Full article: The Zulu Principle by Jim Slater

Basic Screen Settings: minimum price $5, minimum trading volume 500.000 (200.000 for EU only), at most Mid caps

• Direct link to US Results only
• Direct Link to EU Results only

Each of these 6 screens provides a good starting point to search for undervalued stocks, each from its own angle. For example, the Tiny Titans screen only looks for microcaps and the Zulu screen uses a market capitalization of up to $2 billion.

For the four remaining trading ideas, Qualcom stands out. this stock appears in no less than three different trading ideas (results on 24/08/05)