This is Part 1 of a step-by-step series on how to pick winning stocks by industry. We’ll move in tight, logical stages: define the lane (today), build a tradable universe, layer on quality and balance-sheet filters, set valuation bands, add timing rules, then publish a repeatable shortlist.
Throughout this series I’ll use StockAnalysis.com for screening, research pages, and saving watchlists. There’s a free version; it’s enough to follow along. I recommend Stock Analysis Pro for saved screens, unlimited access to all data and tools, and many other useful features.
Step 1: Pick the Right Lane (How to Choose an Industry Before You Touch a Ticker)
You don’t start with a “hot stock.” You start by choosing a lane where the businesses share the same economics. Do this right and everything downstream—screening, comps, valuation, timing—gets easier and cleaner.
What “industry” means (and why it matters)
- Sector = giant bucket (e.g., Technology).
- Industry = narrow slice with similar revenue drivers and cost structures (e.g., Software – Infrastructure).
- Compare companies inside the same industry. Cross-industry comps are noise.
The rule: narrow until the economics rhyme
You want companies that:
- sell to the same customer,
- face the same inputs,
- share the same cycle.
If those three don’t match, you’re mixing apples and lawnmowers.
How to define the lane in a screener (hard, simple switches)
- Industry: target industry (example: Software – Infrastructure).
- Exchange: NYSE, NASDAQ. Skip NYSEARCA/BATS (ETFs). NYSE American only if liquid (≥$1B mkt cap, ≥300k avg vol, ≥$10M dollar vol).
- Country: United States.
- Is Primary Listing: Yes (avoid ADR/duplicate tickers).
Stop here. No quality or valuation yet. Clean scope first.
Deal with mislabels without wasting a day
Taxonomies differ (GICS/ICB/NAICS). You’ll see oddballs. Let the industry toggle pull a first draft, then manually remove non-peers and add back true peers that got misfiled. Two minutes scanning business descriptions is enough.
Minimum tradability so you’re not analyzing ghost
Even in Step 1, kill the unbuyable clutter:
- Market Cap ≥ $1B
- Average Volume ≥ 300k
- Dollar Volume ≥ $10M
- Stock Price ≥ $5
This is not “quality.” It’s “I can actually get in and out.”
How to do Step 1 in Stock Analysis (with screenshots)
The walkthrough below demonstrates Step 1 using the Software Infrastructure industry in the United States. You’ll set the screener to that lane, apply basic tradability gates, and save the “base universe” you’ll reuse in later steps. Swap “Software Infrastructure” for any other industry later—the process is identical.
Goal: define a clean, tradable industry lane. No quality/valuation yet.
Where to click: Stocks -> Stock Screener
Add these filters:
- Industry: e..g Software Infrastructure
- Exchange: check NYSE, NASDAQ
- Country: United States
- Is Primary Listing: Yes
- Minimum tradability (still Step 1):
- Market Cap ≥ $1,000,000,000
- Average Volume ≥ 300,000
- Dollar Volume ≥ $10,000,000
- Stock Price ≥ $5
Save the screener: Saved Screens -> Select Saved -> Enter label (e..g US Software Infra)
Where We Stand Now
You picked a precise industry lane and built a clean, tradable universe: primary U.S. listings only, no ETFs, no illiquid junk, and no misclassified outliers. You locked in simple, repeatable screener settings (industry, exchanges, country, primary listing) and added basic tradability gates so every name on your list is actually buyable. You also learned to sanity-check taxonomy labels and keep only true peers whose economics rhyme. That’s the entire point of Step 1—get the scope right before you judge any business.
Next up (Step 2): we’ll layer in two hard quality filters—unit economics (ROIC, margins, free cash flow) and balance-sheet strength (Debt/EBITDA, Interest Coverage)—to strip out weak operators and leave a shortlist of durable, high-return candidates. Then and only then do we talk valuation and timing.
Better Investor Project 