Returns: O'Shaughnessy's
18.8% versus Our Improved Screen's 29.6%
and 85.3% Returns
Keeping in mind that past
performance is not a guarantee of future performance, our
modified screen resulted in an annualized return of 29.6%
when back-tested to 2002.
This assumes holding all 50 stocks. However, holding
only three stocks or ten stocks
resulted in higher returns.
Our back-tested holding
periods were for six months, but for investors wishing
to minimize commissions and capital gains taxes, we recommend
12-month holding
periods. Active investors who enjoy trading more frequently
may want to try a shorter minimum
holding period such as one month, a quarter, or six months.
In each 6-month period during the testing, our improved screen
performed better than the S&P 500. It also out-performed
the S&P 500 in both up and down markets. Furthermore,
we've found that if an investor bought the 10 stocks with
the highest relative price strength (in other words, the stocks
in positions 1-10 on our screen),
the annualized return increased to 41.4% per year
when using a six-month holding period.
Best
Performers: 4th, 5th, & 6th Positions
Of those ten stocks that outperformed the other forty companies,
the stocks in the 4th, 5th, and 6th positions (shown
in bold on our stock
screen) went on to rack up the highest back-tested returns
(an average annualized return of 85.3%).
The reason for this is likely because the stocks in positions
1-3 have risen so fast that they are bound to cool off. Please
note that Cornerstone Stocks can be notoriously volatile,
especially those with low trading volume. In bear markets,
these stocks can often drop much more than the market.
Starting in April 2008 we
will no longer track real-time performance of this stock screen
due to the time investment needed to track such a large number
of stocks. Since May of 2003, buying only the stocks in the
4th, 5th, and 6th positions and holding for a month has resulted
in real-time returns 52% higher than the S&P 500: 18.6%
total return versus 12.2%.
Please note that stockscreens
are meant to give an experienced investor a starting point
for investment ideas for a portion of the investor's portfolio.
Investors still need to complete their due diligence to determine
if the stocks are suitable for their own portfolio. Investing
in only three stocks does not create a diversified portfolio
and is not recommended.
Next: Implementing
the Cornerstone Growth Stock Screen
(Top of Page)
Past Screen Results
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