How We Found PetSmart (PETM)

by Geoff Gannon


Someone who reads the blog emailed me asking how Quan and I found PetSmart (PETM):

 

Did you find PetSmart idea through running a stock screen? If yes, which screener did you use and what parameters ?

 

And here’s how I answered:

 

Quan found PetSmart on a list of stocks that returned more than 10% a year over 15 years. I had sent him a list of every stock in the U.S. that returned more than 10% a year over 15 years (it was a bad 15 years for U.S. stocks at that time) and we added it to a watchlist. We didn’t analyze the online threat for some time. But then the stock price dropped. And we focused completely on the stock at that point.

 

Just to be clear, it wasn’t exactly a screen. What I did is use Portfolio123 to generate a list of U.S. stocks on a certain start and end date with price information (adjusted for splits). And then I figured out how to order them in Excel so I could create lists that compounded their stock price by certain amounts over certain periods of time.

 

We chose the 10% a year over 15 years simply because Portfolio123 only has data going back like 17 years or so for stock prices. And we sometimes use 10% as an adequate return number. We hoped that just using a long-term stock price compounding test would turn up some stocks we might otherwise miss by using just the kinds of methods value investors normally screen for.

 

Read Quan’s Notes on PetSmart (PDF)

 

Talk to Geoff about PetSmart (PETM)

 

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