- No OTC stocks.
- No ADRs.
- Liquidity test. The average daily total amount traded over the past 60 trading days must be larger than $100,000.
- Market Cap > $50 million.
- Price > $1. True penny stocks are excluded due to various information issues and manipulation of these stocks.
- Total Debt to Total Equity Ratio not missing. This filter insures we are looking at stocks that actually have data on the total debt to equity ratio.
Having always stressed on investing in companies that are not highly leveraged, I chanced upon this backtest study done by Fat Pitch Financials and found the results rather surprising.
A brief overview of the study is as follows: