Screening Profitable Small-Cap Stocks with Converging Moving Averages

Summary

The document describes an equity screen combining at least five overlapping moving averages, positive earnings, and a market capitalization capped at 10 billion yuan. Its proposed expanded rules also require five consecutive profitable quarters, a price-to-earnings ratio no higher than 20, a price-to-book ratio of at least 1, operating cash flow at least equal to net income, debt no greater than half of assets, dividend yield of at least 2%, and turnover no higher than 20%. The moving-average condition is presented as a way to find price stability and areas of support or resistance.

The post suggests adding valuation and size measures to refine the screen, and it flags risks from unstable markets, high valuations, and limited resources at smaller firms. It provides no backtest, performance results, or evidence that the combined thresholds improve returns. Its opening description says “no-loss” companies, but the final criteria specify recent profitability rather than a complete guarantee against losses; the post also does not define how to measure moving-average overlap.

Key ideas

• The initial screen selects stocks with at least five overlapping moving averages, positive earnings, and market capitalization up to 10 billion yuan.
• The expanded screen adds profitability history, valuation, cash flow, leverage, dividend yield, and turnover requirements.
• Moving-average overlap is intended to indicate relative price stability and possible support or resistance areas.
• Market instability, high valuations, and small-company funding constraints are cited as risks.
• The document supplies no backtest or evidence validating the thresholds.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.