Learn From The Leaders: Kirk Spano Uses Screeners To Find Midcap Winners On Seeking Alpha

Key Concepts

Seeking Alpha Premium: A financial research platform offering advanced tools.
Stock Screener: A tool to filter stocks based on specific criteria.
EPS Revisions (Earnings Per Share Revisions): Changes in analysts' forecasts for a company's future earnings, a key indicator for identifying inflection points.
Midcap Stocks: Companies with market capitalization typically between $1 billion and $20 billion, often targeted for growth potential.
Large Cap Stocks: Companies with large market capitalizations, generally over $10 billion.
Short Squeeze Potential: The likelihood of a stock's price rapidly increasing due to short sellers buying back shares to cover their positions.
Crowdsourcing Approach to Research: Utilizing the collective intelligence and ratings of a large community of analysts and investors.
Momentum Investing: Investing in stocks that have shown strong recent price performance.
Valuation Correction: A period where stock prices adjust downwards to reflect more realistic or lower valuations.
Scuttlebutt (Philip Fisher): A research methodology involving gathering information by talking to a company's competitors, customers, suppliers, and former employees.
Margin of Safety Investing: Kirk Spano's investing group, focused on finding undervalued opportunities.

Utilizing Seeking Alpha Premium for Investment Idea Generation

Kirk Spano, the Investing Group Leader at Margin of Safety Investing, demonstrates how he uses Seeking Alpha Premium's screening functions daily to identify investment opportunities. He emphasizes that while the platform offers extensive content, the stock screener is a primary tool for finding actionable ideas. He typically starts with Seeking Alpha's pre-built screens and then customizes them to fit his specific investment criteria, maintaining "a dozen screens" for regular use.

Midcap Stock Screener: Identifying Future S&P 500 Candidates

Spano highlights his midcap screen as a crucial tool for finding "alpha." He defines midcap companies as those with a market capitalization between $1 billion and $20 billion. The objective is to identify growing companies, often dividend growers, that are not yet in the S&P 500 but have the potential to be included, leading to significant returns.

Step-by-Step Screening Process:

Initial Setup: Spano customizes the screener using the "edit function."
EPS Revisions (Primary Filter): This is placed at the top of his criteria. He sets it to include ratings of A+, A, A-, B+, B, B-.
- Rationale: Drawing a parallel to Zach's research service, he explains that early positive earnings revisions from Wall Street analysts are powerful indicators of a company's improving prospects, helping to identify "inflection points" before the broader market catches on. He notes that once all analysts are saying "buy," the stock is usually already priced in.
Seeking Alpha Analyst Rating: He also considers this rating, valuing the "crowdsourcing approach to research" to catch newer trends early. He aims to be early but "not too early."
Momentum: To avoid "bid up" stocks, he often removes "A" ratings for momentum, preferring growth over existing price appreciation. He consistently avoids "F" ratings due to extreme underlying reasons.
Refinement Process (Example):
- Starting with a broad midcap list (e.g., 277 companies).
- Filtering by positive EPS Revisions.
- Filtering out "D" ratings in Profitability (e.g., reducing the list to 244 companies).
- Filtering out "A" ratings in Momentum (to avoid expensively priced stocks, cutting approximately 100 stocks).
- Filtering out "D" ratings in Valuation (likely overvalued, further reducing the list to 92 companies).
- This iterative process creates a tighter, more focused list of high-profitability stocks.

Large Cap Stock Screener: Observing Market Valuation

Spano also maintains a large cap stock screener, similar in setup to his midcap version. He observes that currently, "not a lot of large caps or mega caps are hitting my screens," even with broad settings. This observation, particularly the scarcity of undervalued large caps, leads him to suggest that the S&P 500 index "might have a bit of a valuation correction at some point."

Short Squeeze Potential Screener: Capitalizing on Analyst Revisions

One of Spano's favorite screens targets stocks with "short squeeze potential."

Specific Criteria:

Short Interest: More than 6%.
EPS Revisions: Similar positive earnings revision potential as used in the midcap screen.

Rationale: The core argument is that if analysts' positive earnings revisions prove correct, the high short interest will likely "shrink," leading to a "surge in the stock price" as short sellers cover their positions.

Key Examples:

Flowtech: A company he knew from the fracking boom era.
Innovative Industrial Properties (IIPR):
- This is a current position held by his investing group.
- Catalyst: The potential for President Trump to "rerate marijuana," making the market more accessible.
- Momentum Indicator: The stock often shows a "D" rating for momentum, indicating a lack of short-term appreciation or even a decline. This, combined with heavy shorting, can signal a buying opportunity.
- Price Action: IIPR has been "chopping sideways," which Spano identifies as another signal for when to consider buying.

The Indispensable Role of Deep Dive Research

Spano strongly emphasizes that screening tools are merely a "shortcut" to build an initial list of companies. He quotes Warren Buffett, who cites Philip Fisher, stating, "you have to learn about the companies."

Post-Screening Research Process:

Deep Dive: Conduct thorough research into the identified companies.
Scuttlebutt: Employ Philip Fisher's methodology of gathering information by talking to various stakeholders (competitors, customers, suppliers, former employees).
Industry Analysis: Understand the broader industry landscape.
Competitive Intelligence: Ask critical questions like, "What does company A think about companies B, C, and D, and that are competitors there? Are they afraid of them? Do they think they're going to wax the floor with them?"
Insight: Competitors often provide "pretty good takes on each other."

He concludes that these screening tools are essential for an investor's "toolbox" to generate lists, which may reveal overlapping opportunities (e.g., Innovative Industrials appearing on both the Midcap and Short Squeeze lists).

Synthesis and Conclusion

Kirk Spano's presentation provides a detailed guide on leveraging Seeking Alpha Premium's stock screeners to uncover promising investment ideas. He outlines a systematic approach that begins with customizing pre-built screens, prioritizing positive EPS revisions, and strategically filtering for profitability, momentum, and valuation. He demonstrates specific applications for midcap growth, large cap valuation insights, and identifying short squeeze candidates, using real-world examples like Innovative Industrial Properties. Crucially, Spano stresses that while screening is an excellent starting point, it must be followed by rigorous "deep dive" research and "scuttlebutt" to truly understand a company and its competitive landscape, aligning with the wisdom of investing legends like Warren Buffett and Philip Fisher. The ultimate goal is to find companies at inflection points or those undervalued, before they become widely recognized by the market.