No. of Recommendations: 14
Well, I wouldn't call it one of my favourites.
I did post it, when we were talking about how the topics of the board had drifted.
http://www.datahelper.com/mi/search.phtml?nofool=y...As with so many screens, it hasn't added value since it was posted (3.5 years out of sample), return maybe .5%/year lower than the S&P. So it's not yet on it's way to becoming a fave either! To overgeneralize, this family of screens had a bad 2022, underperforming by 18% (non annualized) in the first half 2022, and good performance in other stretches hasn't (yet) made up for that.
But to answer your question, yes, indeed, that step does say to keep the 165 stocks with the highest (not lowest) P/B.
The reason as summarized in that old post:
"You may wonder why it might work--high P/B is not a common factor in screens.
It's not just looking for overpriced stocks to jump on while they're still going up, though there is some of that.
As mentioned in a recent thread, very high P/B more often denotes a very good business than it denotes an overpriced one.
Extremely good businesses make profits without a requirement for a lot of assets.
This means they tend to trade at a high multiple of book value."If you want to know my
favourite screen, it's LargeCapCash
http://www.datahelper.com/mi/search.phtml?nofool=y...Specifically the version which requires a dividend.
This Value Line version exactly as recommended (hold 2 months, top 40HTD45), it has beat the S&P by 5.69%/year after friction in the first 50 months out of sample, while holding nothing but large-cap cash-rich high-ROE firms, and only 1/3 the single-company concentration risk of the S&P. I don't expect that big an advantage in future, but it's off to a nice start. Very high correlation with the S&P, so easy to hedge if you like that sort of thing.
Jim
