Screening · Instrument 06
Distress creates forced sellers, and forced sellers create mispricing. The job is separating businesses that are temporarily broken from ones that are terminally broken. This is the workbench for that: sort candidates into the six situations where forced selling actually happens, gate every one of them on whether the fall is still falling, then value each with the cash-flow basis its business type demands — not the same DCF stamped on everything.
Six categories, in the order they're worth sweeping. Everything you add is saved in this browser only — nothing is uploaded, and clearing site data clears the board. Within each section candidates sort by margin of safety, so the cheapest thing you've actually valued rises to the top.
The downtrend gate runs automatically: Williams %R(52) ≤ −60 (price in the bottom 40% of its 52-week range) and negative 12- and 36-month rate of change. A name that's already reclaimed its range is a completed turn — the gate flags it so it lands on a missed-entry note instead of the buy list.
Two levers only — discount rate and growth — because every extra lever is another place to fool yourself. What does change is the cash-flow basis, which is matched to the business type. DCF-ing a REIT's net income or a bank's free cash flow produces confident nonsense.
Net debt negative if net cash. If your cash-flow figure is already after interest, set net debt to 0 — subtracting it too would double-count the lenders' claim.
Attaching writes the intrinsic value and margin of safety onto the matching ticker in Phase 1, and re-sorts that section.
Rows: growth at g−2 through g+2. Columns: discount rate at r−1, r, r+1. Small print under each value is upside against the current price. Outlined cell is your base case.
For net-nets and asset plays the floor is the thesis, so present what the assets are worth dead alongside what the cash flows are worth alive. Figures in millions, from the latest balance sheet.
Real estate carried at decades-old cost is frequently worth more than book — the PP&E slider goes above 100% for exactly that case. A melting floor is no floor: if cash burn is eating NCAV every quarter, the asset value is a moving target.
The adjustments discussion, which is where most of the real money is found or lost. Never skip it — a clean grid on the wrong equity bridge is a precise wrong answer.
The Screener answers is it cheap. It deliberately doesn't answer how much do I buy, or what does owning it actually pay. Those are the other five instruments, and a finished thesis usually passes through two or three of them.
Cheapness alone isn't an edge — plenty of things are cheap because they deserve to be. The edge comes from identifying a seller who isn't selling on the merits. Each category below is a different mechanism that produces exactly that.
Index funds and parent shareholders receive shares of a company they never chose to own, and dump them into a market with no analyst coverage. Check the Form 10 for management's equity grants, and check whether the parent loaded the spin with debt its cash flow can't carry. The parent post-spin is sometimes the better buy — look at both sides.
An investment-grade to high-yield downgrade forces mandate-constrained funds to sell bonds regardless of price, and equity often sells off in sympathy even when the downgrade reflects leverage rather than business quality. Pass immediately if the downgrade cites fraud or going-concern language.
Goodwill impairments and writedowns produce enormous GAAP losses without a dollar leaving the building. Screeners and quant funds see the headline loss and discard the name while operating cash flow continues untouched. The disqualifier that matters: a restatement touching revenue or cash rather than non-cash items, an auditor resignation, or a material weakness in controls over cash.
After a large one-time payout, mechanical selling appears — yield screeners drop the name because the trailing yield now looks fake, and index funds rebalance. Price frequently falls by more than the cash that actually left. If the drop exceeds the distribution by 20% or more, something mechanical happened. If the dividend was debt-funded, the lower price is entirely rational and there's nothing here.
Multi-year grinds with no triggering event never make the news, so event and momentum screeners never see them. The sellers are exhausted holders, not analysts of the balance sheet. When market cap approaches what the assets alone would fetch, the business comes close to free. Watch for the melting floor — cash burn consuming NCAV each quarter — and for entrenched management with no catalyst, the classic value trap.
The catch-all sweep: large gap-downs where stop-losses and margin calls overshot the actual change in intrinsic value, index deletions with a known forced-selling date, post-bankruptcy emergences held by ex-creditors who want out, and busted IPOs trading near net cash. Classify the cause — a one-time event beats a cyclical downturn, which beats a structural change, which beats a liquidity crisis you should probably skip.
Every candidate in every category passes the same test before it earns any research time, and the test is not about value at all. It's about not chasing.
A stock can be down 35% over three years and sitting at its 52-week high. That's a completed turn, not an entry — the value case may be perfectly intact and it still fails the gate. The point of a watchlist is to be already holding the research when the turn begins, not to buy the third month of a recovery because the story reads well.
The single most common way a DCF goes wrong isn't the discount rate — it's running the wrong cash flow through it.
Normalise the base figure for one-offs before projecting anything, and be honest about the terminal value share. If more than three quarters of your answer sits in the terminal value, the model isn't valuing a business — it's valuing an assumption about the year 2036.
Run the model backwards and ask what growth rate the current price already implies at your discount rate. This is usually more persuasive than the forward model, because "the market is pricing 9% growth forever for a company in secular decline" is a far easier claim to defend than any specific target price.
Buying securities far below a conservative estimate of worth, usually because something has visibly gone wrong. The edge is structural: forced and emotional sellers — index funds, mandate-bound bond funds, screeners reacting to non-cash losses — sell without reference to value. The work is telling temporary distress apart from terminal distress.
Whichever one the business actually generates. FCF for most operating companies, owner earnings where growth capex distorts it, NOI or AFFO for real estate, distributable earnings for financials, mid-cycle figures for cyclicals, and liquidation value alongside the DCF for asset plays. The basis selector on this page changes the labels and the guidance to match.
Solving the model backwards for the growth rate the current price implies at your chosen discount rate. It reframes the question from "what is this worth" to "what is the market already assuming" — a much easier thing to judge honestly.
No. It's a static page with no market data feed, so nothing here fetches quotes or scans for candidates. You bring the names and the figures; the Screener handles categorisation, the downtrend gate, valuation on the right basis, the sensitivity grid, the asset floor, and the ranking. Your board is saved locally in your own browser.