PERFORMANCE OF AAII SCREENING STRATEGIES
Don Gimpel – February 2016
INTRODUCTION
The AAII provides a stock screening service for its members. It consists of 61 screens plus 12 indexes that can serve as bogies. Using the AAII as a data source [1], you can extract information on long and short term total return and convexity, # profitable years, trading cost and risk. With this information available in the form of a WORD table, you can easily determine which strategy most suits your needs by sorting on different columns. The results are given in the section “Observations.”
OBSERVATIONS
The appended WORD Table can be sorted by any column in both ascending or descending order. It is necessary to include the entire row when making the sort otherwise the data will become mixed.
Is there a single classification that beats all others?
Sort the table by descending Cumulative Annualized Return (Column 4) and then examine column (1), Classification. No particular type dominates. All are represented in no particular order. It’s quite clear that you can achieve high returns in many different ways.
Which five screening strategies have provided the highest CAR%:
Strategy CAR %
Estimated Revenue Up 5%. 25.25
Piotroski: High-F Score 25.31
Stock Market Winners: 22.97
Graham Enterprising Investor: 22.40
Price-to-Free-Cash-Flow: 21.33
Only the Estimated Revenue Up: 5% and Price-to-Free-Cash-Flow have a concave up total return curve indicating acceleration of the current upward trend.
Why not just extend the 3-year total return and assume it will continue into the future?
Strategy CAR % # Trades
Investor’s Quality Growth 23.1% 4.4
Murphy Technology 23.3 0.4
Value on the Move – PEG w. Est. Growth 22.2 33.3
Stock Market Winners 22.17 14.1
O’Shaughnessy: Tiny Titans 20.32 24.7
Investor’s Quality Growth and Murphy’s Technology deliver high returns with little effort.
Which screen has the lowest cost (fewest trades)?
The Graham Enterprising Investor: 22.40 4.7
Which screen has the lowest risk?
Buffet: Hagstrom 12.36 3.95
Dividend: 8.66 4.03
Is tax efficiency a concern?
Sort the Table by Column 7, the turnover in % from lowest to highest. The three strategies with significantly low turnover are: Dogs-of-the-Dow with 1.50 and a 1.74% Return, InvestWare with 11.6 and a return of 8.71 and, finally, Buffetology: EPS Growth with 11.9 and 10.36% return. The only one with some tax efficiency and a return is Buffetology: EPS Growth. No surprises here. Note that it is also concave up i.e., accelerating up. You are paying dearly for tax efficiency.
Is there a screen with a top combination of return, risk and cost?
Stock Market Winners has an appealing 22.97 Total Return with a 10.54 risk and a high 3-Year return of 22.17% which means it is still trending up and 4 out of every 5-years have profitable. This selection is somewhat subjective. There are others yielding similar results.
Why would you want to use some of these systems when they are available as an ETF - Insider Net Purchases.
NOTES
[1] Risk is the Statistical Definition of the uncertainty of an outcome. This is measured by the Standard Deviation and in this case by the annualized return of the annual Standard Deviation (=STDEV.P(range)/t^0.5)
[2] CAR is the Cumulative Annualized Return - %
[3] The ratio of 3-year to complete rage Total Return is a measure of the convexity of the price curve.
GLOSSARY
CAR Compound Annualized Return - %
TURN Turnover in %
REFERENCES
1. http://www.AAII.com/
DISCLAIMER This note relies on others for accurate data. Its conclusions should be checked independently. The AAII or its Los Angeles Chapter are not responsible for the contents of this note.
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TABLE 1: AAII STOCK SCREEN PERFORMANCE
Don Gimpel – November 2015
(1) (2) (3) (4) (5) (6) (7) (8) (9)
CLASSIFICATION NAME CAR [2,3] CAR [2] % WIN AVG. TURN. TRANS. RISK [1]
3-Year 15.8-Year Years # % # %
BOGEY / NASDAQ 100 / 17.85 / -0.09 / 68.3 / 1 / 0 / 0.0 / 7.42Value / AAII Shadow Stocks / 9.44 / 18.10 / 68.3 / - / - / - / 7.06
Value / AAII Fund Portfolio / 9.21 / 7.64 / 78.43 / - / - / - / 3.76
Growth+Value w Price Mom. / Est. Rev.: Up 5% / 39.96 / 25.75 / 81 / 40 / 92.7 / 74.16 / 8.17
Value / Piotroski: High F-Score / 17.13 / 25.31 / 74.6 / 20 / 23.4 / 20.0 / 23.40
Growth+Value w Price Mom. / Stock Market Winners / 22.17 / 22.97 / 81 / 12 / 58.6 / 14.06 / 10.54
Value / Graham Enterprising Investor Revised / 11.36 / 22.40 / 68.3 / 9 / 26.2 / 4.7 / 11.04
Value / Price-to-Free-Cash-Flow / 32.49 / 21.33 / 81.0 / 30 / 21.9 / 30.0 / 20.00
Value with Price Mom. / O’Shaughnessy: Tiny Titans / 20.37 / 20.97 / 74.6 / 25 / 49.4 / 24.7 / 12.05
Growth+Value w Price Mom. / Value on the Move – PEG with Estimated Growth / 22.23 / 20.37 / 87.3 / 28 / 43.9 / 33.36 / 6.89
Growth+Value w Price Mom. / Est. Rev.: Top 30 Up / 16.2 / 19.98 / 81 / 178 / 81.3 / 289.43 / 8.89
Value / Graham Enterprising Investor / -3.03 / 17.61 / 81.0 / 18 / 14.3 / 5.2 / 7.03
Growth with Price Mom. / O’Neil’s CANSLIM Rev. No Float / 46.05 / 17.60 / 61.9 / 15 / 49.0 / 15.7 / 8.60
Growth plus Value / Neff / 9.44 / 17.54 / 74.6 / 22 / 32.7 / 14.4 / 7.57
Value with Price Mom. / O’Shaughnessy: Small Cap Growth Val / 13.88 / 16.42 / 74.6 / 25 / 49.4 / 24.7 / 7.23
Value / Graham Defensive Investor (non-Util.) / 2.06 / 15.82 / 81.0 / 21 / 19.4 / 8.1 / 5.94
Growth plus Value / Kirkpatrick Value / 8.83 / 15.78 / 61.9 / 3 / 73.3 / 24.7 / 9.04
Growth+Value w Price Mom. / P/E Relative / 6.01 / 15.30 / 81 / 31 / 77 / 47.74 / 4.68
Growth plus Value / Zweig / 5.28 / 14.99 / 74.6 / 11 / 42 / 9.24 / 7.69
Growth+Value w Price Mom. / Dreman with Est. Revisions / 6.14 / 14.73 / 87.3 / 12 / 83.7 / 10.09 / 7.20
Value with Price Mom. / O’Shaughnessy: Growth / 9.59 / 14.62 / 74.6 / 50 / 37.6 / 7.6 / 6.75
Growth+Value w Price Mom. / Value on the Move – PEG with Hist. Growth / 17.58 / 14.40 / 74.6 / 78 / 36.7 / 57.25 / 5.15
Value with Price Mom. / Lakonishok / 13.35 / 14.18 / 68.3 / 31 / 90.1 / 55.86 / 4.92
Growth plus Value / Foolish Small Cap 8 Revised / 9.51 / 14.14 / 74.6 / 5 / 41.1 / 9.72 / 12.13
Value / Fundamental Rule of Thumb / 8.62 / 13.69 / 81.0 / 50 / 21.2 / 21.2 / 9.18
Growth plus Value / Price-to-Sales / 5.77 / 13.40 / 74.6 / 53 / 39.1 / 41.5 / 6.34
Growth with Price Mom. / O’Neil’s CANSLIM Rev. 3rd Edition / 13.90 / 13.33 / 87.3 / 7 / 64.4 / 9.0 / 5.86
Growth plus Value / Buffett: Hagstrom / 14.97 / 12.36 / 81.0 / 30 / 19.6 / 11.8 / 3.95
Growth / Return on Equity / 7.31 / 11.74 / 68.3 / 32 / 20.6 / 13.2 / 5.17
Growth plus Value / Dreman / 8.82 / 11.50 / 74.6 / 21 / 31.4 / 13.2 / 5.23
Growth plus Value / T. Rowe Price / 11.28 / 10.99 / 68.3 / 8 / 47.7 / 7.63 / 9.03
Value / Weiss Blue Chip Dividend Yield / 6.79 / 10.85 / 81 / 12 / 24.6 / 5.9 / 4.38
Growth plus Value / Lynch / 1.04 / 10.82 / 68.3 / 25 / 21.1 / 24.7 / 7.96
Growth with Price Mom. / O’Neil’s CANSLIM / 2.45 / 10.65 / 42.9 / 6 / 56.9 / 6.8 / 9.73
Growth with Price Mom. / Kirkpatrick Growth / 14.62 / 10.65 / 47 / 12 / 61.4 / 14.7 / 9.73
Growth plus Value / Buffetology: Sustainable Growth / 11.27 / 10.62 / 81.0 / 32 / 13.4 / 8.6 / 5.50
Growth plus Value / Buffetology: EPS Growth / 13.27 / 10.36 / 81.0 / 46 / 11.9 / 10.95 / 5.20
Growth+Value w Price Mom. / Oberweis Octagon / 4.07 / 10.24 / 68.3 / 15 / 41.6 / 12.48 / 8.32
Value with Price Mom. / O’Shaughnessy: All-Cap / -4.53 / 9.85 / 68.3 / 21 / 34 / 14.28 / 6.34
Growth plus Value / Wanger (Revised) / 12.72 / 9.73 / 68.3 / 30 / 26.7 / 16.02 / 5.56
Value / Magic Formula / -1.99 / 9.44 / 68.3 / 30 / 23.2 / 13.9 / 9.21
Growth plus Value / Templeton / 8.04 / 9.39 / 81.0 / 21 / 28.4 / 11.93 / 6.11
Growth plus Value / Kirkpatrick Bargain / 0.82 / 9.38 / 74.6 / 16 / 63.9 / 20.45 / 4.63
Value / Cash Rich Firms / 9.60 / 9.01 / 68.3 / 29 / 24.3 / 14.1 / 6.89
Growth+Value w Price Mom. / ADR Screen / 17.64 / 8.76 / 68.3 / 24 / 43.9 / 21.07 / 8.93
Growth / InvestWare Quality Growth / 23.15 / 8.71 / 74.6 / 19 / 11.6 / 4.4 / 4.70
Growth plus Value / Rule #1 Investing / 11.02 / 8.68 / 61.9 / 13 / 27.9 / 7.25 / 9.27
Growth with Price Mom. / Driehaus / 17.32 / 8.67 / 55.6 / 66 / 31.1 / 41.1 / 10.73
Growth plus Value / Dividend (High Relative Yield) / 8.38 / 8.66 / 74.6 / 38 / 20 / 15.2 / 4.03
Growth / Dual Cash Flow / 5.65 / 8.12 / 74.6 / 66 / 31.1 / 41.1 / 8.00
Growth with Price Mom. / Foolish Small Cap 8 / 14.62 / 8.09 / 61.9 / 15 / 41.9 / 12.57 / 8.82
Value / Graham Defensive Investor (Utility) / 2.82 / 7.42 / 74.6 / 18 / 14.3 / 5.2 / 4.26
Value / Schloss / -5.61 / 7.21 / 55.6 / 12 / 54.3 / 13.0 / 10.18
Growth+Value w Price Mom. / Magnet Simple / -26.39 / 5.79 / 42.9 / 3 / 68.5 / 4.11 / 22.75
Value / O’Shaughnessy: Value / 0.53 / 4.49 / 58.3 / 50 / 22.2 / 22.2 / 5.76
Growth plus Value / Fisher (Philip) / 12.94 / 3.83 / 42.9 / 15 / 32.4 / 9.72 / 10.45
Value with Price Mom. / O’Shaug1hnessy: Growth Market Lead / 7.61 / 3.79 / 68.3 / 10 / 43 / 8.6 / 4.99
Value / Dogs of the Dow / 8.06 / 1.74 / 15.8 / 10 / 7.5 / 1.5 / 4.36
Value / Dogs of the Dow – Low Priced / 13.64 / 1.39 / 68.3 / 5 / 15.4 / 1.5 / 5.25
Growth+Value w Price Mom. / Magnet Complex / 0.95 / 1.08 / 61.9 / 2 / 74.2 / 2.97 / 8.93
Growth+Value w Price Mom. / Muhlenkamp / -23.59 / -0.21 / 61.9 / 17 / 23.7 / 8.06 / 7.23
Growth+Value w Price Mom. / Est. Rev.: Down 5% / -2.13 / -2.05 / 61.9 / 75 / 89.3 / 133.95 / 9.30
Growth+Value w Price Mom. / Insider Net Purchases / -4.21 / -2.58 / 55.6 / - / - / - / -
Growth+Value w Price Mom. / Est. Rev.: Lowest 30 Down / -6.17 / -3.37 / 49.2 / 222 / 79.5 / 352.98 / 17.86
Growth plus Value / Murphy Technology / 23.3 / -7.27 / 49.2 / 10 / 29.7 / 0.4 / 24.70
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