Millennial Money Portfolio Stock Screen
Overview
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Stock Strategy Which Produced an Annualized Return of 20.2%
This strategy comes from the fantastic book Millennial Money by Patrick O'Shaugnessy. This strategy produced annualized returns of 20.2% per year going back to 1973. On the next page we also present an alternative method that could produce even better returns.
| Factors Used in Millennial Money Strategy |
Value:
defined by free cash flow (operating cash flow less capital expenditures and dividend payments) per share for the trailing 12 months divided by the current share price. The result is then ranked for the stock universe. Cheaper valuations historically result in higher stock returns. |
| Earnings Quality: ([Cash from Operations 12m]-[Net Income 12m])/[Market Cap Q1]. The result is then ranked for the stock universe. This factor attempts to ferret out accounting shenanigans and outright fraud. |
| Shareholder Orientation: [Cash from Financing 12m]/[Market Cap Q1]. The result is then ranked for the stock universe. This factor seeks out companies that are paying down debt and buying back stock while weeding out companies that are taking on debt and diluting stockholder earnings by issuing additional stock. |
| Return on Invested Capital: measures how much profit is being realized from capital invested by the company. The result is then ranked for the stock universe. |
| Momentum: this 26-week measure of relative strength is also ranked for the stock universe. Stocks with positive momentum tend to continue to outperform in the near to mid term. |
| Strategy's Stock Universe |
Minimum Market Cap: the author used $200 million as the minimum market cap. It's important to note that each year the author adjusted the minimum for inflation. Failure to adjust for inflation will result in a list of stocks that is different from the author methodologies. Note: the author stated "for smaller individual investors, this limit could be reduced to [an inflation-adjusted] $50 million, which would produce even better results." We will consider also posting a $50 million version of the stock screen if enough subscribers are interested. |
| ADR stocks: included. |
| OTC stocks: excluded. |
| Stocks within the financial sector: excluded because of the structure of their financial statements. |
The author's results were obtained by running the stock screen annually, buying the top 25-rated stocks, and holding for a year. Results were tested with purchasing in each month of the year so that results would not be skewed in case purchasing in a certain month produced superior returns.
Use the links on at the top of bottom of the page to view the stocks that currently meet the criteria. The list of stocks is updated monthly.
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