Results are indeed killer for the one month hold from 1997 onward, but something bad was happening prior to that ... underperforms the S&P from 1986 to 1996 .... 8% vs. 15%. The "enw" field at backtest.org doesn't mean the same thing 1986-1996 as it has since then.Value Line changed their lineup of fields in December 1996 and that was one of the big changes."enw" stands for "earnings on net worth". It is derived from the fieldcalled "% Return Net Worth" prior to 1997 and from the field called"% Earned Net Worth" thereafter, which sounds plausible (which is why itwas done) but it may in fact match the 1997-and-later field called "% Earned Common Equity".Maybe the discontinuity in results is a result of the known discontinuityof the data going into it, maybe not.The main lesson is that high ROE (preferably without undo leverage) makes good sense from the point of understanding how a good business makes its money from a moat, and is generally confirmed by quantitative studies across all firms. Though it isn't enough to make you an investing genius and it might let through some duds, on average a nice steady high ROE is a very good sign.A monkey with a dartboard full of high ROE firms will almost certainlyoutperform a monkey armed with a dartboard of all firms.As an aside, the more a firm is growing the more important the ROE.A growing firm with an uninteresting ROE is worth nothing extra due to its growth rate, and even a slowly growing high ROE firm is potentially worth a lot.The PEG ratio is misleading, as it conflates growth with worthwhile growth.Rather than growth/PE it should be something more like (1+ growth rate above inflation times amount by which ROE exceeds the long run median) times(the amount by which the cyclically adjusted earnings yield exceeds Siegel's constant of 6.5%).As a fun exercise, try this calculation for both Amazon and Walmart.Jim
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