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Now, imagine you could simply skip investing in a randomly selected 20 of the many losers, and invested equally in all the other 480 companies for the same one year period.
I tried this, and the average one year return rose to 22.1%, an increase of 5.4%.
So you got a list of 1-year losers, and then picked 20 of them randomly, and then did the test on the remaining 480 for the follow-on year?
What would be a way to select 20 or so potential losers? Low ROE and low cash? Bad relative price strength in a weak sector?
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