Growth vs. Value: Designing Different Investment Screens Around a Common Bollinger Framework
As I continue developing my portfolio management application, I have been trying to simplify an increasingly important question:
Should different types of stocks be evaluated using different screening criteria?
In particular, I want to create two distinct investment universes:
- A Growth Watchlist
- A Value Watchlist
The objective is not to create two completely different technical trading systems. Instead, I want to continue using Bollinger Bands and %b as a common price-based screening mechanism, while supplementing them with different indicators depending on the investment thesis.
That distinction is important.
Bollinger Bands can tell me that something unusual is happening to a stock’s price. They cannot tell me whether the underlying company represents an attractive growth investment or an attractive value investment.
The investment strategy needs to answer that question.
A Three-Layer Screening Model
A useful way to think about the system is as three separate layers.
1. Watchlist Qualification: What Kind of Company Is This?
The first question is fundamental rather than technical.
Does the company qualify for the Growth Watchlist or the Value Watchlist?
Growth and Value require different qualification criteria because the investment thesis is different.
2. Bollinger Condition: Is This an Interesting Time to Look at the Stock?
Once a company qualifies for a watchlist, Bollinger Bands provide a common mechanism for detecting unusual price conditions.
In particular, Bollinger %b normalizes the stock’s position within its Bollinger Bands:
%b = 0.00corresponds approximately to the lower Bollinger Band.%b = 0.50corresponds approximately to the 20-day moving average.%b = 1.00corresponds approximately to the upper Bollinger Band.- Values below 0 or above 1 indicate movement outside the bands.
A low %b therefore provides a useful mechanism for identifying potential accumulation opportunities.
A high %b can identify stocks that have become extended and may warrant review for trimming.
3. Supporting Evidence: Does the Setup Make Sense?
Once Bollinger %b identifies an interesting condition, other indicators help interpret what is happening.
This is where Growth and Value should begin to diverge.
For a Growth stock, momentum, trend and volume may be particularly important.
For a Value stock, valuation, cash flow, dividends and balance-sheet strength may deserve greater weight.
The resulting architecture becomes:
Fundamentals determine what belongs on the watchlist.
Bollinger Bands determine when a stock deserves attention.
Supporting indicators help determine whether the opportunity is credible.
Designing the Growth Watchlist
The Growth Watchlist should begin with the business rather than the stock chart.
Possible qualification criteria might include:
- Revenue growth above approximately 10%
- EPS growth above approximately 10–15%
- Positive forward earnings-growth expectations
- Healthy or improving margins
- Preferably positive free cash flow
- A business model that does not depend entirely on profitability arriving many years in the future
These thresholds do not need to become rigid rules immediately. The important point is that a stock should qualify fundamentally as a growth company before its technical condition becomes relevant.
Once the company qualifies, Bollinger %b becomes an entry or accumulation tool.
A potential Growth accumulation condition might eventually look like:
Qualified Growth Stock
AND
%b ≤ 0.20–0.30
AND
PDMA200 > 0
The PDMA200 condition is particularly useful for Growth.
PDMA200 measures the percentage distance between the current stock price and its 200-day moving average.
Requiring a positive PDMA200 means that I am generally looking for short-term weakness within an established longer-term uptrend, rather than trying to catch a growth stock that has entered a sustained decline.
PDMA50 would also provide useful context.
A stock that has fallen below its 20-day moving average but remains comfortably above its 50-day and 200-day averages represents a very different situation from a stock that has broken below all three.
Supporting Growth Indicators
For Growth stocks, I would initially focus on:
- %b
- PDMA20
- PDMA50
- PDMA200
- RSI14
- VRatio
- DIV2050
RSI14 helps identify short-term momentum conditions.
VRatio helps determine whether a price movement is occurring on unusually high or low volume.
DIV2050 helps show whether the 20-day and 50-day moving averages are converging or diverging.
Together, these provide context around the basic Bollinger pullback condition without turning the system into an overly complicated collection of signals.
Possible Growth Watchlist Candidates
Examples of the kinds of companies that might populate a Growth Watchlist include:
- NVIDIA
- Broadcom
- Amazon
- Meta Platforms
- Alphabet
- Microsoft
- Arista Networks
- Vertiv
- GE Vernova
- Comfort Systems USA
These are examples of the type of company that could belong in the universe, not permanent classifications or recommendations.
A company should remain on the Growth Watchlist only while the underlying growth thesis continues to qualify.
Designing the Value Watchlist
The Value Watchlist requires a different philosophy.
A value stock can have mediocre recent price momentum and still represent an attractive investment opportunity. In fact, weak market sentiment may be one reason the valuation opportunity exists.
For that reason, I would not necessarily make:
PDMA200 > 0
an absolute requirement for a Value stock.
Instead, Value qualification should be driven primarily by fundamental measures.
Potential indicators include:
- Forward P/E
- P/E relative to the company’s historical valuation
- P/E relative to its industry or sector
- Free-cash-flow yield
- EV/EBITDA
- Dividend yield
- Dividend coverage
- Debt/EBITDA
- Return on invested capital
- Earnings stability
However, using all of these would quickly make the system unnecessarily complicated.
A better approach may be to create a small Value Score based on perhaps four fundamental measures:
Forward P/E
Free-Cash-Flow Yield
Dividend Yield
Debt/EBITDA
The objective would be to establish that the company is fundamentally attractive before using Bollinger Bands to identify an accumulation opportunity.
A Value pullback might therefore look like:
Qualified Value Stock
AND
%b ≤ selected pullback threshold
Unlike Growth, PDMA200 would initially be supporting information rather than an absolute gate.
RSI14 could provide additional evidence that the stock is experiencing unusual short-term selling pressure.
Possible Value Watchlist Candidates
Examples of companies that might warrant consideration for a Value Watchlist at an appropriate valuation include:
- Cisco Systems
- Verizon
- Pfizer
- CVS Health
- UPS
- ExxonMobil
- Chevron
- Realty Income
- Selected mature financial companies
- Selected mature industrial companies
Again, these should not be viewed as permanent classifications.
A stock may qualify as Value at one price and cease to be particularly attractive after a substantial price increase.
That suggests an important principle:
Value Watchlist membership should ultimately depend on valuation, not merely on the company’s identity.
One Technical Engine, Different Investment Strategies
A key architectural decision is that I do not want separate technical systems for Growth and Value.
The application already calculates a useful common set of technical measures:
- Price
- MA20
- MA50
- MA200
- Bollinger Bands
- %b
- PDMA20
- PDMA50
- PDMA200
- DIV2050
- RSI14
- VRatio
There is no reason to duplicate this infrastructure.
Instead, each portfolio can eventually have an associated Strategy.
For example:
Growth Watchlist → GROWTH strategy
Value Watchlist → VALUE strategy
The application can then interpret the same technical information differently depending on the portfolio strategy.
A Growth Pullback
A Growth accumulation candidate might eventually require:
%b ≤ selected threshold
PDMA200 > 0
Growth Qualified = YES
Supporting evidence could include:
RSI14, VRatio, PDMA50 and DIV2050
The underlying question is:
Is this temporary weakness in a fundamentally strong growth trend?
A Value Pullback
A Value accumulation candidate might instead require:
%b ≤ selected threshold
Value Qualified = YES
Supporting evidence might include:
RSI14, PDMA200, Forward P/E, FCF Yield and Dividend Yield
The question is different:
Has the market given me an unusually attractive price for a fundamentally sound business?
Rebalancing Across Strategies
This model also fits naturally with the Rebalance Candidates feature already implemented in the application.
The Rebalance screen identifies securities at opposite Bollinger extremes.
A low %b can identify potential destinations for capital.
A high %b can identify positions that may warrant review as potential sources of capital.
Adding Growth and Value classifications makes this considerably more interesting.
For example, the system might identify an extended Growth holding as a potential trim candidate while simultaneously identifying a qualified Value stock experiencing an unusually deep pullback.
That does not mean automatically selling one and buying the other.
Instead, the system is identifying a potentially useful capital-allocation decision for review.
Investment Universes Rather Than Technical Systems
This leads to what may be the most important simplification.
Growth, Value, AI Infrastructure, Core and other portfolios do not necessarily need different technical engines.
They are better understood as different investment universes.
Bollinger Bands and %b provide a common attention mechanism:
Something unusual is happening to this stock’s price. Look at it.
The strategy then determines what question should be asked.
For Growth:
Is this temporary weakness in a fundamentally strong growth trend?
For Value:
Has the market given me an unusually attractive price for a fundamentally sound business?
This separation creates a cleaner portfolio-management model:
Qualification determines what deserves to be watched.
Bollinger Bands determine when it deserves attention.
Strategy-specific indicators determine how the opportunity should be evaluated.
The next logical experiment is therefore relatively simple: create separate Growth Watchlist and Value Watchlist portfolios, populate them with a manageable number of candidate companies, and observe how the existing Bollinger-based screening system behaves before adding additional complexity.
That allows the investment process—and the application supporting it—to evolve empirically rather than by continually adding more indicators.