Finviz Stock Scanner: Best Ways To Scan For Halal Growth Stocks

Finding stocks that align with Islamic finance principles (Halal investing) can feel daunting. Many investors struggle to filter out companies involved in prohibited activities like alcohol, gambling, or interest-based finance. Fortunately, tools like the Finviz stock screener can significantly simplify this process. This article will guide you through using Finviz to identify potential Halal growth stocks, focusing on key filters and strategies.

Finviz is a powerful, free (with a paid premium version) stock screener that allows you to filter stocks based on a wide range of fundamental, technical, and descriptive criteria. While it doesn’t have a dedicated "Halal" filter, we can creatively use its features to build a screening process that aligns with Islamic guidelines. Let's dive in.

Understanding Halal Investing Principles

Before we jump into Finviz, let's briefly recap the core principles of Halal investing:

  • Avoidance of Prohibited Industries: This includes companies involved in alcohol, tobacco, gambling, pork production, conventional interest-based finance (banking, insurance), and pornography.
  • Debt-to-Asset Ratio: Many scholars recommend a maximum debt-to-asset ratio, often around 33%. This is to ensure the company isn't overly leveraged.
  • Interest-Bearing Income: The proportion of interest-bearing income should be minimal.
  • Purification: If a company derives a small portion of its income from non-Halal sources, purification (giving a portion of dividends to charity) may be required. Consult with a qualified Islamic scholar for guidance.

Keep these principles in mind as we configure our Finviz stock screener.

Step-by-Step Guide to Scanning for Halal Growth Stocks on Finviz

Here's a breakdown of how to use Finviz to find potential Halal growth stocks:

1. Accessing Finviz and Setting Initial Filters:

  • Go to the Finviz website (finviz.com).
  • Click on the "Screener" tab.
  • You'll see three tabs: "Descriptive," "Fundamental," and "Technical." We'll primarily use "Descriptive" and "Fundamental."

2. Descriptive Filters: Defining the Universe

The "Descriptive" tab helps us narrow down the initial list of stocks. Here are some filters to consider:

  • Country: Select the countries you are interested in. You might want to focus on countries with strong economies or emerging markets.
  • Industry: This is crucial. Exclude industries that are clearly non-Halal. This includes:
    • Beverages - Alcoholic
    • Gambling
    • Tobacco
    • Banks
    • Insurance (Life, Property & Casualty, etc.)
    • REIT - Mortgage
    • Leisure
  • Market Cap: Consider the market capitalization. You might want to focus on mid-cap or large-cap companies for greater stability, or small-cap companies for higher growth potential (but also higher risk).
  • Average Volume: Set a minimum average volume (e.g., 100,000 shares) to ensure sufficient liquidity. This makes it easier to buy and sell the stock.

3. Fundamental Filters: Focusing on Growth and Financial Health

The "Fundamental" tab allows us to filter based on financial metrics. This is where we'll try to approximate Halal compliance.

  • Debt/Equity: This is a key metric. While Finviz doesn't offer a direct "Debt/Asset" ratio filter, Debt/Equity is a good proxy. Aim for a Debt/Equity ratio of less than 0.5. This translates to a Debt/Asset ratio close to the 33% guideline. Remember this is an approximation, and further due diligence is needed.
  • EPS Growth Next 5 Years: This is a measure of expected future earnings growth. Set a minimum value (e.g., 10% or 15%) to identify companies with strong growth potential.
  • Sales Growth Past 5 Years: Similar to EPS growth, this indicates historical revenue growth. Set a minimum value to find companies with a proven track record.
  • Return on Equity (ROE): ROE measures how efficiently a company is using its equity to generate profits. Look for companies with a consistently high ROE (e.g., above 15%).
  • Profit Margin: A healthy profit margin indicates that the company is efficiently managing its costs. Set a minimum profit margin (e.g., 10%).
  • P/E Ratio (Price-to-Earnings): While not directly related to Halal compliance, the P/E ratio can help you assess whether a stock is overvalued or undervalued. Consider companies with a reasonable P/E ratio relative to their growth rate (PEG ratio).
  • Dividend Yield: While dividends are permissible in Halal investing, it's important to ensure that the company's primary business is Halal. You can use this filter to find companies that pay dividends, but always prioritize Halal compliance first.

4. Technical Filters (Optional): Timing Your Entry

The "Technical" tab allows you to filter based on technical indicators. This is optional but can help you time your entry into a stock.

  • SMA200: You might look for stocks trading above their 200-day Simple Moving Average (SMA) to indicate an upward trend.
  • Volatility: Filter for stocks with moderate volatility to manage risk.

5. Reviewing and Refining Your Results

After applying your filters, Finviz will display a list of stocks that meet your criteria. This is just the beginning!

  • Company Website: Visit the website of each company to understand its business model in detail.
  • Financial Statements: Review the company's financial statements (balance sheet, income statement, cash flow statement) to verify the data presented by Finviz and assess its financial health.
  • News and Research: Read news articles and research reports to understand the company's prospects and potential risks.
  • Consult with a Scholar: Crucially, consult with a qualified Islamic scholar or financial advisor to get their opinion on the Halal compliance of each stock. This is essential for ensuring that your investments align with your religious beliefs.

Example Scenario:

Let's say you want to find US-based Halal growth stocks with strong earnings growth and reasonable debt levels. You could set the following filters:

  • Country: USA
  • Industry: (Exclude prohibited industries as listed above)
  • Market Cap: Mid-Cap or Large-Cap
  • Debt/Equity: < 0.5
  • EPS Growth Next 5 Years: > 15%
  • Sales Growth Past 5 Years: > 10%
  • Average Volume: > 200,000

After applying these filters, you would then research each company that appears to ensure its business activities are Halal and consult with a scholar.

Important Considerations and Limitations

  • Finviz is a Tool, Not a Guarantee: Finviz is a powerful tool, but it's not a substitute for thorough research and due diligence. The filters we've discussed provide a starting point, but you must verify the Halal compliance of each company independently.
  • Debt/Equity is an Approximation: Using Debt/Equity as a proxy for Debt/Asset is an approximation. Always consult the company's financial statements for the most accurate data.
  • Subjectivity: Determining Halal compliance can be subjective. Different scholars may have different opinions. It's important to consult with a scholar whose views you trust.
  • Purification: Even if a company's primary business is Halal, it may have some incidental income from non-Halal sources. In such cases, purification may be required. Consult with a scholar for guidance on how to calculate and distribute the appropriate amount to charity.

Conclusion

Using the Finviz stock screener can significantly streamline the process of finding potential Halal growth stocks. By carefully selecting the appropriate filters and conducting thorough due diligence, you can identify companies that align with both your financial goals and your religious beliefs. Remember to consult with a qualified Islamic scholar to ensure that your investments are truly Halal compliant. Happy investing!