QuantAI Alpha Pick

Screening Filters

1. Market Cap ≥ $2,000,000,000

   • Purpose: Focus on mid- to large-cap companies.
   • Rationale: For an “Alpha Pick” style screen, you typically want companies that are more established and liquid than small-caps or micro-caps. A $2B+ market cap threshold:
     • Reduces the risk and volatility associated with very small companies.
     • Increases the likelihood of better disclosure, analyst coverage, and institutional interest.
     • Targets companies where “alpha” can come from fundamentals and execution, not just speculative hype.

2. Price Above 200-Day Moving Average (PriceAboveMA200)

   • Purpose: Ensure positive or constructive long-term price trend.
   • Rationale: Being above the 200-day moving average is a common technical signal that:
     • The stock is in a longer-term uptrend or has at least recovered from prior downtrends.
     • Market participants are generally voting “yes” with their capital, which supports the idea of relative strength and upside momentum—core ideas when seeking “alpha” candidates.
     • Filters out many structurally weak or downtrending names where fundamentals may not yet be reflected positively in price.

3. Region: United States

   • Purpose: Restrict the universe to U.S.-based listings.
   • Rationale: For an Alpha Pick universe, limiting to one major region:
     • Keeps accounting, regulation, and disclosure standards more uniform.
     • Aligns with many investors’ home-bias or mandate to focus on U.S. equities.
     • Reduces currency and geopolitical complexities so you’re isolating more “stock-specific” alpha rather than macro noise.

4. Exchange: XNYS (NYSE), XNAS (NASDAQ), XASE (AMEX)

   • Purpose: Include only major U.S. exchanges.
   • Rationale: These exchanges:
     • Are highly regulated and tend to list more established companies.
     • Offer better liquidity, tighter spreads, and more reliable price discovery—important for any “alpha” strategy actually executable at scale.
     • Avoid the risks of OTC or pink-sheet securities, which can be illiquid and more prone to manipulation.

5. Return on Equity (ROE) ≥ 15%

   • Purpose: Target companies with strong profitability and capital efficiency.
   • Rationale: High ROE is a classic quality factor:
     • Indicates management is generating robust profits relative to shareholder equity.
     • Tends to be associated with competitive advantages (moats), strong business models, or superior execution.
     • For “alpha,” you’re looking for businesses that compound value effectively; high ROE is one of the most common markers of that.

6. Quarterly Revenue YoY Growth ≥ 15%

   • Purpose: Ensure meaningful top-line growth.
   • Rationale: For an alpha-oriented pick list, you usually want not just quality but growth:
     • ≥15% year-over-year revenue growth signals companies expanding their market, product adoption, or pricing power.
     • Growth + quality (high ROE) is a powerful combination historically associated with market outperformance.
     • Helps filter out mature, slow-growth firms that may be solid but less likely to generate outsized returns.

7. P/E (TTM) between 10 and 40

   • Purpose: Control valuation—avoid both extremely cheap (potential value traps) and extremely expensive (hype-driven) names.
   • Rationale:
     • Lower bound (≥10): Excludes ultra-low P/Es that often reflect distressed or structurally declining businesses, which can be “value traps” rather than true alpha opportunities.
     • Upper bound (≤40): Excludes the highest-flying, speculative names that may be priced for perfection and vulnerable to sharp drawdowns.
     • Keeps the focus on reasonably valued growth/quality companies where fundamentals can still drive upside without needing unrealistic expectations.

Why Results Match “QuantAI Alpha Pick”

• The screen combines quality (ROE ≥ 15%), growth (revenue YoY ≥ 15%), and reasonable valuation (P/E 10–40)—a classic framework for finding potential alpha: strong businesses growing at a healthy pace, not absurdly priced.
• The technical filter (PriceAboveMA200) ensures the market is already confirming the story via positive price action, improving the odds of aligning with existing or emerging trends.
• Size and listing filters (market cap ≥ $2B, U.S. region, major exchanges only) focus on liquid, investable names where any alpha thesis is more practical to implement and less dependent on speculative illiquidity.

Together, these filters approximate a systematic way to surface stocks that have a higher probability of delivering excess returns (alpha) based on a blend of quality, growth, valuation, and trend.