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Hi TDT -- you make some really good points in your post, particularly:

My second nagging concern is that by only buying healthy looking companies we probably won't buy the outrageously huge winners.

Yes! You are right! I have been working hard myself (on a different type of screen) at manually doing the final sifting, and overall my success rate has been poor with one exception: when the only thing I do is eliminate the real, blatant, obvious, total losers. And I really mean, total complete utter disaster losers. Not a company where debt is pretty high, or margins are lower than you'd like, or inventories are ballooning... but real bad cases like:

1) They are being investigated by the SEC on numerous fronts
2) They have just lost their only customer
3) Their recent healthy-looking financial results were due to an obvious one-time event only (like, they just sold off ALL their useful assets)
4) Numerous recent headlines about the company likely filing Chapter 11
5) The company is actually "winding down" their business and the last year's results were due to selling off their assets

I have watched in despair as one company that I immediately wrote off because its debt was high and book value was negative then proceeded to triple in three weeks; upon (much) closer inspection the assets contributing to book value were carried at much lower than their current value (GAAP rules), and the company was actually pretty healthy.

To juice MFI returns, I think you really only need to avoid the total losers, most of the time.

How to find them?

1) Read the headlines for the last few months for any shocking info (Yahoo's site is good for that, others are too)

2) Pull up the latest 10-K or 10-Q SEC filing (don't be intimidated) and read just the business description. It will say, for example, that the company is winding down its operations.

3) Read the company's press release for its latest earnings announcement and look for things like "revenues have decreased by 80% due mainly to the loss of our most significant customer".

These are pretty simple steps to take. I wouldn't try to run lots of numbers, or even the Piotroski test, etc. I would look just for things in plain sight.

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