This might be a tough question but I figure who better to answer it
than the folks here at Google!
What I'm looking for are various stock strategies that outperform the
market indices. Let me give you a few examples first so you'll
understand what I mean:
*The Dogs of the Dow strategy - This strategy says to buy the ten
highest-yielding Dow stocks at the start of each year and then
rebalance the portfolio each year. An alternate version of this
strategy has you buying the five lowest-priced stocks from the ten
highest-yielding stocks. This strategy is outlined in Michael
O'Higgins book "Beating the Dow".
*What Works on Wall Street - James O'Shaughnessy's book outlines a
number of strategy, one of the best of which is to buy stocks with a
low price to sales ratio and high relative strength.
*Worst of the Dow Strategy - I'm not sure this is the technical name
but I came across this strategy in the most recent issue of Fortune.
It has you buying the five worst performing stocks from the previous
year. According to the person quoted in Fortune, investing in this
strategy in 1930 would have turned $1,000 into $2 million, about $1
million more than if you had simply purchased the entire Dow.
I'm looking for more strategies like this. My criteria are as follows:
1. They have to be entirely objective - No one can really dispute the
stocks that would be picked for the strategies above. It's simply a
matter of running the number or figuring out performance and then
buying the stocks. What I don't want is a strategy where one of the
criteria is something like "company has solid management". That's
just too hard for the average investor to judge.
2. There needs to be a long track record associated with the
strategy. At least twenty years and preferably quite longer. I don't
want anything that simply has worked well in the last five or ten
years.
3. The strategy has to have solidly outperformed the market index
which it is being compared to (mostly likely the Dow or the S & P
500).
4. The strategy can either be mentioned in an article or on a website
or there can be a book that describes the strategy.
5. The information required to follow the strategy must be free. I
don't want a website that says it has a killer strategy and then
charges $99 for the information required to follow it. An exception
would be books as they can usually be had at the local library.
I'll consider a satisfactory answer to be at least three strategies
that fit the criteria above (and are separate from the ones I listed).
Additional strategies will result in a higher tip. :) Feel free to
let me know if you have any questions or if this question requires
further clarification. |
Request for Question Clarification by
omnivorous-ga
on
28 Jan 2004 13:22 PST
Jpbischke --
It's tough to identify "proven" strategies for beating the market or
market indices. Understand that legions of MBA students (and their
professors) spend their time investigating such strategies and testing
market inefficiencies.
Still, a controversial Eugene Fama - Ken French article titled "The
Cross-Section of Expected Stock Returns" in the 1992 Journal of
Finance contended that two strategies beat the market:
1. investing in small firms
2. investing in value stocks
For a more-detailed explanation, see this Google Answer:
http://answers.google.com/answers/threadview?id=273817
Best regards,
Omnivorous-GA
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Clarification of Question by
jpbischke-ga
on
28 Jan 2004 14:19 PST
Thanks for the response. I'll take a look at the link you posted a
bit further to see what I can glean from it.
I realize that such strategies are relatively rare but from the
empirical evidence associated with the strategies that I listed, I
think that some strategies do exist that have historically
outperformed the market. I realize that historical outperformance is
no guarantee of future returns but at the same time if you can find a
strategy that makes logical sense and has outperformed the market
fairly consistently for the last say, 70 or 80 years, I think that
investing in the strategy is a fairly good bet.
I've been impressed enough with O'Higgins' and O'Shaugnessy's work to
see if I can't find others who might have done something similar.
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Request for Question Clarification by
omnivorous-ga
on
28 Jan 2004 15:14 PST
JPB --
The only other strategy that I've ever found interesting and heard
some positive commentary on it is using Value Line's timing strategies
on a selected portfolio:
Value Line
http://www.valueline.com/pdf/quickgd.pdf
Best regards,
Omnivorous-GA
|
Clarification of Question by
jpbischke-ga
on
31 Jan 2004 11:56 PST
Cool. I had temporarily forgotten about Value Line. Do you happen to
know if there is a place that Web that outlines Value Line's
performance vs. the S & P? I found this:
"An investor who purchased all stocks rated #1 by Value Line at the
start of each year since 1965 and sold them at the end of each year
would have seen his/her investments appreciate more than 14,000%
through June 30, 2002!"
However, I'm looking for something a little more detailed. Also, I'm
a bit curious as to why Value Line's mutual funds don't seem to have
done very well in the past.
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