Charles Kirkpatrick and the Kirkpatrick Bargain Screen
Charles D. Kirkpatrick II made his name as a technical analyst. He co-authored Technical Analysis, a standard text for candidates sitting the Chartered Market Technician (CMT) exam, and he holds the CMT designation himself. His 2008 book Beat the Market: Invest by Knowing What Stocks to Buy and What Stocks to Sell (FT Press) set out three mechanical stock models. The Kirkpatrick Bargain Screen is the youngest and most experimental of them: he assembled it between January 2005 and December 2007 by taking the best-performing triggers from his separate studies of price strength, valuation, and earnings growth and folding them into a single list.
The core idea: elite momentum at a moderate price
Like every Kirkpatrick model, the Bargain Screen starts from relative price strength — each stock's current weekly close measured against its own 26-week moving average, then ranked across the whole market. What sets this version apart is the fundamental leg it pairs with that momentum, and two deliberate quirks in how it is drawn.
First, it does not chase the cheapest stocks. Kirkpatrick's testing of the relative price-to-sales ratio — a valuation yardstick he favored because sales are harder for management to massage than earnings — found the best forward returns not at the bottom of the valuation range but in a middle band, roughly the 17th to 42nd percentiles. The deepest-discount names below that band actually underperformed, so the screen skips the bargain bin's lowest shelf. Second, it demands extreme momentum: where his Growth and Value lists set the price-strength bar at the 90th percentile, the Bargain list lifts it to the 97th, because the looser cutoff waved through more names than a real portfolio could hold. Earnings growth, the third of his relative measures, is left out entirely — his tests found only a weak tie between reported earnings growth and later returns.
What the Kirkpatrick Bargain Screen looks for
- Share price greater than $10.
- Market capitalization greater than $1 billion.
- Relative price strength ranked in the 97th percentile or higher — the top 3% of the market (Kirkpatrick allows easing this toward the 90th percentile if too few companies pass).
- Relative price-to-sales ratio ranked in the 17th to 42nd percentiles.
- No stocks that trade over the counter (OTC).
Why the screen can work
The design tries to capture the upside of momentum without paying a rich price for it and without leaning on a growth signal Kirkpatrick distrusted. Over its brief test window the mix looked potent: the Bargain Model returned 77.3% in 2007, ahead of the Value Model's 25.3% and the Growth Model's 43.0% that year. Buying only stocks in the strongest 3% of the market gives the list its thrust, while the moderate price-to-sales band is meant to leave some margin of safety underneath — cheap enough to have room to re-rate, not so cheap that the discount is flagging a broken business.
What to keep in mind
Kirkpatrick was candid that this is his least-proven model. He built and tested it over barely three years, all inside a bull market that ended in the 2008 crash, and said plainly that it needed several more years of evidence before he would call it a success. The mechanics carry their own risks. A 97th-percentile momentum filter buys stocks at the very top of their run, where a reversal does the most damage, and the list is meant to hold only about twenty names, so it is concentrated. The 17th-to-42nd-percentile valuation window is an empirical sweet spot pulled from one backtest, not a law of markets. Kirkpatrick's own exit rules sold a holding once its price strength fell to the 52nd percentile or its price-to-sales rank slipped outside a 7-to-67 band — the screen covers only the decision to buy.
Sources
Beat the Market: Invest by Knowing What Stocks to Buy and What Stocks to Sell, Charles D. Kirkpatrick II, FT Press, 2008.
American Association of Individual Investors (AAII) — Stock Investor Pro screen definition.