I wasn’t going to say much about my watchlist to maintain a bit of mystery and so my hordes of followers didn’t inflate the prices of the stocks I on the list before I bought them. But thinking about it the one reader who seems to be following my blog at the moment is from China and may not even speak good English let alone have enough money at hand to invest in the UK stock market to do this.

Developing and maintaining a watchlist of the best possible shares on the UK market is a key part of my process so here’s how I go about it and what’s on the list.

Identifying shares

The main way I identify shares is using a small number of simple screens. I use Stockopedia to run these screens as I find Stockopedia easy to use and perfectly adequate for my relatively simple needs. It also has ‘Stockranks’ which can be a useful screening input. My screens are based on a small number of quantitative quality factors: long term ROCE, FCF growth rate, long term momentum, net cash/debt position and operating margin.

Before adding any shares I like to the watchlist I will then do a high level qualitative assessment, basically trying to look into the business’s future. I try to understand what the business does and whether it has a competitive advantage in a growing defensive market and whether there are any big risks the screens might be missing  e.g. competitive or technological threats, falling demand, regulatory threats etc. This is the tricky part that involves careful judgment and seems more of an art than a science to me at the moment. Fundamentally what I’m looking for is certainty of long term compound growth. I’ll think about this again before I actually add a share to the portfolio.

For a small number of shares I follow this process the other way round i.e. I find a business I like the sound of qualitatively and then I check the numbers in more detail. This can pick up other shares that would have failed screening for various reasons (e.g. recent merger or IPO) but that I believe are high quality nonetheless.

My current watchlist

In order of market cap:

1. Diageo
2. Reckitt Benckiser
3. Shire
4. Imperial Brands
5. Relx
6. ITV
7. Intercontinental Hotels
8. Paddy Power Betfair
9. Burberry
10. Sage
11. Hargreaves Lansdown
12. DCC
13. ASOS
14. Rightmove
15. Aberdeen Asset Management
16. JD Sports Fashion
17. Spirax-Sarco Engineering
18. Howden Joinery
19. Renishaw
20. Moneysupermarket.com
21. Cineworld
22. Victrex
23. ZPG
24. Aveva
25. James Halstead
26. Dart
27. RWS
28. CLS Holdings
29. Nichols
30. EMIS
31. Gamma Communications
32. Biotech Growth Trust
33. FW Thorpe
34. Avon Rubber
35. Keywords Studios
36. MJ Gleeson
37. dotDigital
38. Treatt
39. Character
40. Portmeiron
41. Judges Scientific
42. Adept Telecom
43. Animalcare