Why Stock Screeners Don’t Work
Remember value line, zacks and magic formulas?
Every investor starts with the same ritual.
Punch some numbers into a stock screener: low P/E, high ROE, strong free cash flow, maybe low debt. Out pops a list of “good companies.”
And then reality hits: half those names underperform, some collapse, and the few that rise do so for reasons the screener never captured.
Why?
Because the entire exercise is built on the wrong frame of causality.
1. They Filter by Static Criteria in a Dynamic System
Markets don’t reward yesterday’s numbers — they reward change - tempo?
A screener says “this stock is cheap today,” but price moves come from tomorrow’s marginal buyer or seller.
The flow is dynamic; the filter is static.
2. They’re a Commodity Tool
If a stock looks good on a screener, everyone sees it.
Institutions, newsletter writers, retail traders — all looking at the same lists.
The “edge” is already diluted the moment it appears.
3. They Assume Fundamentals Drive Flow
Markets clear on orders, not ratios.
A company can have perfect fundamentals, but if ETFs are deleting it, systematic outflows are hammering it, or liquidity is thin, price will fall anyway.
Screeners don’t read flow — they just report accounting snapshots.
4. They Confuse Cause and Effect
A low P/E doesn’t mean “cheap.” It often means the market already sees trouble.
A high ROE doesn’t mean “superior.” It often means leverage hiding fragility.
Screeners package these as opportunities, but they’re usually just lagging signals of the crowd’s judgment. Unless a change in tempo?
5. They Collapse Under Variance
Even if you find a company that meets every filter, variance destroys the thesis.
Earnings surprise, liquidity event, policy shift — the stock halves overnight, and your “screen” never protected you.
Why? Because you never controlled tempo. You just rode variance like everyone else.
The Core Flaw
Stock screeners fail not because the data is bad, but because the paradigm is bad.
They try to extract certainty from probability.
They scan for static attributes in a system governed by bursts, dislocations, and variance collapses.
That’s why I don’t screen stocks.
I author the exact second variance resolves in the only instrument that matters: the global clock, the S&P 500.
Screeners mostly search for yesterday.