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Here's my fave quant approach of the day.
Thesis: A high ROE is good. So an infinite ROE is better, right?
A firm that can make money with no net book value at all is often a great long run investment. Coke, Moody's.

So, the strategy of the day:
Look in the Value Line set of 1700 stocks.
Find those with:
Negative or zero book value per share, positive trailing-four-quarter earnings, and positive "Current EPS" (which includes two quarters of forecasts).
On average there are about 31 stocks meeting those three criteria, though occasionally as few as 4.
Buy equal dollar amounts of the 15 stocks with the highest projected EPS growth in the next 3-5 years.
If there aren't 15 of them (average is 13.6), pad the portfolio with some SPY so no stock position is over 1/15th of the portfolio.
Hold for a month. Repeat.
Note, this seems to work just fine despite the fact that their database has occasional errors or out of date data fields.


Doesn't that raise a red flag if the liabilities exceed the assets? Wouldn't a truly profitable firm be loaded with cash and have a positive book value? Given that you cannot always trust the reported asset value (especially if it consists of mostly highly non-liquid assets), a negative book value looks especially scary.

That said, mungofitch, your idea of paying particular attention to mutual funds sounds good. The Sequoia Fund is one example. What others are worth mining for ideas?
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