Ask Colin

How many stocks should I expect to find in a value scan and does it alter with market conditions?

The number of stocks that come out of a value scan will vary enormously. You are correct in assuming that it will depend on the market conditions.

At the start of a bull market you will get lots of stocks come up. Many will also be genuinely bargains. The market will be generally undervalued.

At the end of a bull market, you will get fewer stocks come up. And many will be of low quality - cheap because they are likely to fail. The market will be generally overvalued.

This general tendency is modified a bit by relating the PE ratio used in the scan to the bond rate. So while the economy is expanding on low interest rates we use a higher PE ratio than when the economy has contracted and interest rates are higher. This is described in more detail in my book Building Wealth in the Stock Market.

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