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William O'Neil did not come right out and say the CANSLIM stock-selection strategy he developed is designed to buy high and sell higher. But considering O'Neil's disdain for PE as an analytic tool and his heavy demands when it comes to growth, it's east to see why one might assume he said it. Intellectually speaking, that would outrage many. Interestingly, though, the model we developed based on our application of CANSLIM (with no reference to PE or any other valuation metric) performed quite well, even during bearish periods, enough so to merit a look even by those who usually shun high valuations. Full Article »
Mon Jul 20, 2009
It seems obvious that it would be worthwhile to impose some sort of rule or rules relating to trading volume, value traded (number of shares traded multiplied by price per share) or market capitalization in order to enhance the likelihood that stocks identified in a particular model should be tradable in the real world, on reasonable terms. Actually, though, this can be quite a delicate matter. Full Article »
Wed Jan 13, 2010
Professor William Sharpe may be the oddest choice for an all-star model, considering that he never published a stock selection model per se. Yet for anyone who has formally studied security analysis, he's one of the biggest names in the field, a Nobel Prize winner in fact. He's best known for the Capital Asset Pricing Model, one of the cornerstones on investment theory. And yes, this is the same Sharpe as in the well-known Sharpe Ratio. But there's more here than just ivy: It is, indeed possible, to adapt this high-level theory into a practical stock-selection model. Full Article »
Wed Oct 28, 2009
Martin Zweig is not a friend of the underdog; underdog stocks that is. He says "the trend is your friend" and seeks to buy winners and sell losers. But unlike many who make such pronouncements, he isn't just looking for stocks that are racing ahead. He pays a lot of attention to the underlying companies and wants stocks that are winners, not necessarily based on idle hype but based on the strength of company performance, stock that win because the companies deserve to win. Full Article »
Have you ever heard of Joseph Piotroski? You're in good company if you haven't. He my be the least-well-known among our investing all-stars, and that may be because strictly speaking, he's not an investor. He's an academician and our model is based, not upon a book describing strategies he used to beat the market but on a research paper he wrote demonstrating a way to do it. Ivory tower aside, however, it's actually a pretty good strategy and in backtests, our Piotroski-based model beat most of our other all-star approaches. Full Article »
