In the past 2 articles we looked at the 2 most popular screens. The Greenblatt Magic Formula screen looks for good quality companies whose shares can be purchased at bargain prices. The Piotroski screen looks for low price-to-book value stocks with improving fundamentals. While both screens allow investors to achieve significant returns if used as designed, they each have their flaws...[more]
In North America, the Greenblatt Magic Formula is still our most popular screen. This screen was created by Joel Greenblatt, one of the most successful hedge fund managers of his generation. He started Gotham Capital in 1985 and managed to compound his capital at 50% per year from 1985 until 1994. Some tips on how he managed to achieve this can be found in his bestseller 'You can be a stock market genius', a book I highly recommend...[more]
The Piotroski screen remains one of our most popular screens. It's a buy-and-hold strategy based on purchasing high book-to-market firms with strong fundamental signs. Piotroski designed the f-score, which is the sum of 9 binary scores in 3 categories: profitability (Return on Assets, Cash Flow Return on Assets, Change in Return on Assets, Accrual), funding (Change in gearing or leverage, Change in working capital, Change in outstanding shares), efficiency (Change in Gross Margin, Change in asset turnover).
Companies with a high Piotroski score are more likely to increase future earnings and have a smaller risk of failing...[more]
Our European portfolio again performed exceptionally well during the last month. The STOXX600 continued its downward trend and dropped 460 basis points, from a YTD return of 6% at the start of month to only 1,6%. Our portfolio performed significantly better and recorded a drop in YTD profit of only 100 basis points, from 24,6% to 23,6% This brings YTD alpha to 22,
an increase of 340 basis points compared to last month. What does that mean? It means that the index lost all its profits for the year while our portfolio is still at a gain of 23,6% YTD!
In the US it has been more challenging. The S&P recorded a drop of 260 basis points in September and now shows a YTD loss of -6,8%...[more]