Your Next Great Stock: How to Screen the Market for Tomorrow’s Top Performers 

Mr. Hough has made the stock Market easy to understand and follow. I always felt intimidated by the process, but now I am finally able to make my own decision and not rely on someone else. I am looking forward to his next book, keep up the great work.

I bought this book because I sometimes read Jack Hough’s stock stories on SmartMoney and two picks of his I followed have done great. I recommend the book to anyone who wants to make money in stocks. It’s pretty short, I read it in two days. The strategies make a lot of sense and the explanations are easy to understand.

I agree with the earlier reviewer who noted that the most effective section of this book is the one that explains why many investors could be better off selecting their own stocks and avoiding mutual funds. The section on screening was interesting but would have been stronger with actual examples.

As another reviewer noted, there are a few eyebrow-raising errors. Warren Buffett’s last name is misspelled throughout the book, for example. On page 97 the error is compounded in an unintentionally amusing way, when a reference to the styles of Buffett and Peter Lynch becomes “the Buffet and Lunch strategies.” Sounds like the copyeditor might’ve been distracted by hunger!

All in all, a good introduction for Do-It-Yourself investors.

As expected

This is one of the best investment books I have read. It presents a strong case for why you should invest in stocks and why you should rely on yourself in doing that (instead of relying on analysts).

The book describes the process of screening stocks in general and then presents a clear description of 12 screens that look for different kinds of quality stocks to buy. A chapter is devoted for each screen. I found the screens useful, sound, and well explained. The author presents a good explanation of the most important financial ratios and accounting concepts for readers that are not familiar with finance and accounting. Then, he shows how to use them wisely in building screens.

One of the things I liked the most about the book is the presentation of results and ideas from many scholarly research articles from respected journals in finance and accounting. These journals are very important and the author seems to be following the research and results that appear in them.

The missing star is for a couple of inconsistent conditions in one of the screens and a wrong statement about arithmetic averages on page 39. Other than that, I strongly recommend this book for every investor.

Wonderful book. I couldn’t put it down. The author is fabulous. Would give it ten stars if I could.

Should you feel doubt about leaving your investments only in index funds, this book offers an entertaining alternative.

Part One is a general discussion and argument for stock picking,
Part Two is a description of stock screeners (free and subscription) and review of “where the numbers come from” (income statement, balance sheet, cash flow statement),
Part Three is stock screening strategies (“The impatient value screen”, “The new dogs screen”, etc.),
Part Four is, where do you go from here?

The author has a down to earth, entertaining style, explaining pros and cons, what works, what may work, etc. He is realistic about the methods, pointing out possible limitations, weaknesses. He even includes an often missed area, “When to sell?”.

I missed however a little more discussion on technical analysis (I know you can not use screeners for that), trends, general review of favorable and unfavorable market conditions, the role of the Fed and monetary policy, the role of economic indicators, the presidential cycles and, most of all, some samples as well. I understand that a screen run, say in 2003, may have little value now, but a list of potential top 5 or top 10 stocks, then the dissection of these samples would have provided the reader a little more practical advice. Even better, a figure of the given stock price chart would have presented a “face”, a visual image that would have greatly complemented the mostly fundamental screening strategies. In fact, the author could have looked back to the “winners” and described if they were really winners or losers.

At the end I came away from reading this book with that perhaps the best way of picking stocks is to narrow down the stock picking hobby to a sector. Familiarize myself with the unique challenges and qualities of the sector, then start the screen. This way it is a little easier to compare companies as the business operations show more similarity. The Warren Buffett dictum “Favor businesses you can understand” may require more time than most of us have, but getting familiar with a sector perhaps makes it easier to screen for winners and losers.

Overall, I liked this book and learned some tricks. But Mr. Buffett has nothing to fear…

In general, the book is an easy read even for a novice investor, and contains solid ideas as well as practical advice.

The stock screen web site that Jack Hough and Smart Money make available for free is pretty limited. The book points out the features of various for-fee stock screen services, and informs the reader about their cost.

Some of the screens recommended in the book are difficult to implement in practice.

This book is strictly about stock picking, and does not cover portfolio design that is probably more important than individual stock picking for achieving superior returns. Therefore, the book’s true value can be best realized if its used together with other books (e.g., Ken Fischer’s “The only three questions that count”).

Chapter 3 has some excellent insight about behavioral finance; the reader should re-read this chapter when doing the post-screen selection.

Chapter 9 was probably the most disappointing part of the book. It attempted to explain how to read and interpret income statements, balance sheets, and cash flow statements, but the coverage was cursory – insufficient even as an introduction.

There were some errors in the book that were pretty self-evident, and indicated that additional proofreading would have been needed.

I also missed a number of things from the book. For example, the Author stated about the various stock-picking screens that they could beat the market by a certain percentage point per year, and when back-tested over a long period, what was the total and annualized return. What is missing here is the actual holding period after buying the stock. The stock screen reveals good prospects that are, by definition, good today. But it is obvious that their advantage is temporary; buying them today does not guarantee market-beating returns for the next five years without selling the stock and buying another that takes its place by the same screening process. The turnover rate of the screens is extremely important because of the impact of commissions and taxes on the realized gains. Just as the compounded interest is powerful to increase wealth, the compounded impact of taxation is powerful robbing one of that wealth. Hough describes screens that beat the market by e.g. 6%, but if it is in a taxable account, and the screen requires a less than 12 months holding period, much of the gain will be eaten up by the taxes to the point that a merely market-matching index fund that does not incur tax expenses (no realized gain, very long holding period) may come out ahead. Of course, that is not an issue in an IRA account.

It is highly respectable that Hough does not promise outlandish results – no hype here. All in all, this book is a good addition to your library’s selection on stock market investing.