No. of Recommendations: 8
Broadly speaking, this particular screen will have it replaced only when there is another high-sales-growth Nasdaq type firm with better price momentum.
...
High sales growth and momentum sounds like it could be quite the ride. Does this screen wholly make up the aggressive part of your mechanical allocation, or are there other screens that also make up the aggressive piece?
It's around 6% of my current quant portfolio, so around 20-25% of the aggressive chunk which is itself around a quarter of the total.
Yes, it's a bit volatile, but the *average* is quite good, so it's intended as yeast for the overall loaf.
The backtest is pretty good, anyway. That doesn't mean all that much, but it's better than a bad backtest!
For example: six picks, equally weighted, hold 2 months and repeat, January 2000 to May 2024 inclusive. (2000 was not an auspicious time to start a Nasdaq momentum screen)
CAGR 19.8% versus S&P 500 total return 7.4%
First five months this year (not annualized), up 38.7% versus S&P 12.1%. It has held NVDA all year so far.
It's a wild ride, but then so is an index. Worse rolling year for the 6-stock screen was -36% versus -46% for the S&P 500 and roughly -60% for the Nasdaq 100 equal weight. The odds of a positive rolling year are about a tie with the S&P. As with many a quant screen, the problem isn't the wildness of the ride, it's the long stretches that it fails the "what have you done for me lately" test. For example, that hypothetical 6-stock portfolio went net nowhere from August 2015 through April 2020. Patience and faith are required in this field, and sometimes they aren't ultimately rewarded. That's why I run more than one screen, and that's why I strongly favour screens that have been working at least a little for several years after they were created.
I'm sure I'll be forgiven for not posting the exact screen details of this one, but it picks large Nasdaq-listed stocks from the Value Line 1700 set of firms based entirely on sundry momentum and sales growth measures, nothing else.
Jim
