Millenial Money

There is a new book out called Millennial Money by Patrick O’Shaugnessy. It recommends screening and ranking and gives a shout-out to Portfolio123 as a tool to do so. Here’s the link to the book on Amazon:

http://www.amazon.com/Millennial-Money-Young-Investors-Fortune/dp/1137279257

I’ve been getting a number of queries of how to build his checklist on page…you know, I’m not sure what page. I bought it on Kindle, so it’s at the 50% mark of the book. He also notes that you can use his findings as a ranking system.

To save time for everyone, I’ve put his system into these public screens/ranks:

Checklist Screener:

https://www.portfolio123.com/app/screen/summary/119902

Ranking System:

https://www.portfolio123.com/app/ranking-system/243197

Ranking Screen that takes the top 25 (meaning no rules, it just points at the ranking system):

https://www.portfolio123.com/app/screen/summary/119904

A few notes:

O’Shaugnessey doesn’t say what universe he’s using, and his system frequently veers into penny stock territory when left to its own devices. It seemed to test well with the Prussell 1000, which is a compromise between a conservative universes and the penny stocks. Users can choose a universe of their own, of course.

He also doesn’t mention a rebalance period. It seems to work OK with four weeks, so that’s what I used. (I should note that I skimmed the book to create the screen, so if anyone has read it in detail and can correct this, please let me know.)

We don’t get any explicit buyback information, so shareholder’s yield is approximate. I’m going with the negative change in the number of shares. (I also tried Equity Purchased, EqPurchTTM, but it didn’t seem to work very well.)

Paul,

Thank you for posting this. I have not read the book but this data will help me determine whether I should.

Scott

Paul,

Agree. Thanks for sharing.

Best,
Tom

EV/FCFTTM higher is better.
Are you sure?

edit:I should probably read the book before questioning the formula…
I’m curious what’s the reasoning behind going for the biggest cap with the most debt that generate the less cash.

Thanks for doing this.

Paul
You can start on Millennial Money page to see the check list of factors and comments on several Ranking options.
On page 121 he states the one year Rebalance requirement.
Thanks for your work on this!
Gary

I think that the EV/Free Cash Flow thing might be kind of a back-door quality criterion. If all of the other rules are true and the market is valuing the company that highly then it’s a good sign. (The lion’s share of EV is market cap.) Marc’s old Reuters Select High P/E screen worked that way.

EDIT: Just to be clear, his checklist Boolean screen demands that the ratio be at least 10, so yes, higher is better in the ranking system. Also edited for English.

I think I found some issues in the checklist screener:
https://www.portfolio123.com/app/screen/summary/119902

(Yield+((SharesPYQ-SharesQ)/SharesPYQ))>5
should be:
(Yield/100+((SharesPYQ-SharesQ)/SharesPYQ))>.05

EV/FCFTTM>10
should be:
EV/FCFTTM<10

enterprise value/ fcfttm is a multiple so probably should say lower not higher, it is a similar to Pe where lower is also better. alternatively fcf/ev * 100 would give the free cash flow yield generated by rhe enterprise, then yes the higher the better.

the ranking system performance improves if you change EV/FCFTTM to lower is better, as others have suggested. If there are circumstances when a more expensive stock is better, then this system doesn’t find them.

I can only blame the anticipation of turkey. I have corrected the screen and ranking system.

Paul, thanks for sharing. The second rule in the checklist screener seems incomplete: 100*OpIncTTM/(DbtTotQ+ComEqQ-CashEquivQ). What is the range for it to filter for? thanks

In his book, he says greater than 30, but that threshold eliminated nearly everything.

I was playing around with this - here’s a simulation based on the ranking system Paul posted for this: 0.01 / share commission, variable slippage, Avg Hi/Low price, 4 weeks, but only sell if Rank < 90.

https://www.portfolio123.com/port_summary.jsp?portid=1335757

and here’s the same thing, adding a very simple market timing SPY hedge:

https://www.portfolio123.com/port_summary.jsp?portid=1340280

not horrible, with reasonable turnover.

Tom C

Hi there,

I am just wondering how did you set the formula for calculating the shareholder yield? In the book it says shareholder yield is equal to financing cash flow/market value.

Thanks

Saavan