Refining the Process: How I Selected 40 Exceptional Growth Companies
This week involved a major overhaul of my investment instruments database, a project undertaken to add greater depth, granularity, and efficiency to my research and reporting. The expanded universe now covers 2,288 instruments, each receiving a daily INSTAT technical score, including 516 stocks trading on about 30 non-US exchanges.
This refresh revealed weaknesses in my previous growth stock screen, leading me to rebuild it from the ground up. The result is a new, focused watchlist of 40 companies—all showing remarkable strength in both revenue growth and profitability. My full analysis will be available in this weekend’s Navigator report.
I also turned my research notes into an audio discussion using Gemini NotebookLM, which you can listen to here:
The Growth Champions: 40 Companies Defying Gravity with Revenue Growth and Profitability
How the list was built
Selection was driven purely by quantitative metrics. Using the platform Ziggma, I screened hundreds of companies labeled as “growth” across numerous publishing sources. Ziggma’s algorithm processes over 50 fundamental indicators to rank US stocks (and a few non-US names) on a scale of 0–100 relative to industry peers, filtering out speculative noise to focus on financial health. Each stock takes mere seconds to check.
From its five factor scores, I prioritized companies with the highest ratings in Growth, Profitability, and Overall Total Score. Valuation and Financial Strength—while critical for portfolio management—were excluded from this screen. The goal was to identify standout performers for ongoing monitoring and analysis.
Notably, all selected companies have factor scores in the 90s, with several achieving a perfect 100.
I’ve done the groundwork—now I invite you to explore the list and draw your own conclusions.
Here’s a breakdown of the Ziggma scoring system:
1. Growth Score
This metric measures a company’s ability to expand its top and bottom lines. It aggregates approximately eight different growth metrics, including:
Forward Revenue & Earnings Growth: Projections of future performance.
Historical CAGR: 5-year compound annual growth rates for revenue and earnings.
Market Share Trends: Tracking if the company is outperforming its industry average.
2. Profitability Score
The profitability score assesses how efficiently a company generates returns from its capital and operations. Key data points include:
Margins: Net profit margins and operating margins.
Return Metrics: Return on Equity (ROE) and Return on Invested Capital (ROIC).
Scale Effects: Whether revenue is growing faster than costs, leading to disproportionate profit growth.
3. Valuation Score
This score determines if a stock is attractively priced relative to its intrinsic value and peers. It uses industry-specific KPIs (e.g., Tangible Book Value for banks vs. Price-to-Sales for tech) and includes:
Standard Ratios: Price-to-Earnings (P/E), Price-to-Sales (P/S), and Price-to-Book (P/B).
Free Cash Flow Yield: Assessing the actual cash generated relative to market cap.
Mean Reversion Analysis: Evaluating if current levels are stratospheric compared to historical norms.
4. Financial Position Score
This is a measure of “balance sheet strength,” designed to identify companies with excessive debt or liquidity risks. It covers:
Solvency: Debt-to-Equity and interest coverage ratios.
Liquidity: Current and Quick ratios.
Industry Specifics: For example, Loan-to-Value (LTV) ratios for REITs.
The Total Ziggma Stock Score
The Total Score (0–100) is a composite of the four sub-scores. It is not a simple average but a weighted algorithmic result that ranks a stock globally within its industry.
75–100 (High Quality): Stocks in this range are considered “Best-in-Class.” Backtesting shows that portfolios maintaining an average score above 75 significantly outperform the S&P 500.
50–74 (Average): Fair performance, likely in line with industry peers.
Below 50 (Low Quality): Often indicates “bad apples” or “value traps” with deteriorating fundamentals.
Would you like me to create a comparison table of how Ziggma’s scoring differs from Seeking Alpha or Morningstar?
Ziggma Stock Score Methodology
This video provides a direct walkthrough of how the Ziggma algorithm processes fundamental data to generate these specific scores.
100% fundamental stock analysis - The Ziggma Stock Score explained - YouTube
Smart Investing Tools for Independent Investors · 362 views
