The Motley Fool Discussion Boards
Stocks B / Berkshire Hathaway
|Subject: Re: Influence on ROE in Investing returns||Date: 10/6/2012 7:23 AM|
|Author: mungofitch||Number: 194698 of 227151|
So if one were to look at your data, what would the value of X be?
Perhaps the value that eliminates the bottom 10% by ROE? Do you know
what this value was on average in your test?
Looks like it's generally the negative numbers, which are more common that I suspected.
Fraction of population of 1700 Value Line stocks by ROE since Jan 1997.
To recap the returns
Negative ROE = 6.11%/year
Zero or unknown ROE = 10.56%/year
Lower half of positive ROE = 11.52%/year
Top half of positive ROE = 12.77%/year
Bad negative numbers aren't worse than small negative numbers.
The lowest returns are simply the subset "<0".
If you wanted the highest return 30 stock portfolio given only the ROE
field you'd choose the 30 stocks with ROE closest to 32%, which gives
15.6%/year before trading costs, perhaps a bit of a lucky outlier.
I guess there are a few absurdly high ROE values that are a bad omen?
A monthly-constituted portfolio of all stocks 35% ROE or better returned 12.6%.
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