No. of Recommendations: 8
Jim recently made a suggestion for a simple screen. Sort the Russell
1000 stocks by ROE, buy the top 150 and hold for a long time, like 1
or 2 years.
I thought about adding some tweaks based on other ideas he has
mentioned -- limit it to only stocks that also have a Value Line
timeliness rating (VL1500), and also look at 5 Year Revenue Growth. I
also cut to 100 stocks instead of 150.
As it turns out, I have data for the Russell 1000 stocks of the last 2
years and the VL1500 stocks of 1 year ago.
Dividends reinvested. Stocks no longer traded are omitted. (These
seem to be stocks that got bought out, generally at a premium.)
Stocks whose earnings are positive and book is < 0 are included in
"best by ROE". Because these are strong companies where the stats
come out weird.
Russell 1000 stock data from barcharts{.}com.
For 7/22/2022 to 7/7/2023:
SPY: 12.8%
IWB: 12.4%
R1000 in VL1500, best 100 by ROE: 14.9%
Best 50: 9.9%
Best 25: 9.8%
R1000 in VL1500, best 300 by ROE, then best 100 by 5yRG: 15.2%
Best 50: 15.8%
Best 25: 16.8%
R1000 in VL1500, best 100 by 5yRG: 11.8%
Best 50: 5.5%
Best 25: 0.7%
R1000 regardless of VL1500, best 300 by ROE, then best 100 by 5yRG: 14.2%
Best 50: 13.4%
Best 25: 8.1%
---------------------
For 7/19/2021 to 7/11/2022:
SPY: -11.2%
IWB: -13.5%
R1000 regardless of VL1500, best 300 by ROE, then best 100 by 5yRG: -14.1%
Best 50: -17.1%
Best 25: -15.7%
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Summary:
It appears that in a good year selecting the best 300 stocks by ROE
and taking the best 100 of these by 5-year-revenue-growth in equal
weight and holding for a year slightly beats the SP&500 index fund and
the Russell 1000 index fund.
In a bad year this is slightly worse than the index funds.
Also, it does not seem that the number of oldings makes much of a
difference.
