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No. of Recommendations: 6
"If you were throwing darts at the S&P 500 over the last year...Only 10 stocks* avoided bear market territory, while 81 fell 60% or more.
Yes, of course the typical MI holding period is 4 weeks or less, but a general headwind of 8x more likely for a severe decline than an ok result is a big obstacle to overcome.

“Four out of every seven common stocks that have appeared in the CRSP database since 1926 have lifetime buy-and-hold returns less than one-month Treasuries.”

So if you know that most stocks suck, then you should have some sort of risk management strategy that you’re implementing on individual securities.


https://theirrelevantinvestor.com/2020/09/10/most-stocks-suc...
*******************
#2 - What Backtests Hide (from Movement Capital)

Financial markets aren’t a field where we can brute force our way to success with data and hard work. In 1969 we put a man on the moon. In 2020 we have much more information and computing power – but still have no clue where the S&P will close next week....

Most value funds are still based on the price-to-book ratio. While informative for old economy stocks, it’s much less useful for tech companies and share repurchasers....

'Value investing is dead' is too extreme of a claim. But I wouldn’t hold out hope for the group of strategies that continue to define a company’s value with last century’s definition....

On Trend Following
The main problem with trend strategies is that they’re vulnerable to the speed of a market crash. They work well in slower downturns like 2008, but aren’t fast enough to protect in quick drops like October 1987. This doesn’t mean trend following is broken, but it does mean the strategy can’t always reduce risk like some marketed it after 2008."

https://movement.capital/what-backtests-hide/

FC
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No. of Recommendations: 7
"If you were throwing darts at the S&P 500 over the last year...Only 10 stocks* avoided bear market territory, while 81 fell 60% or more.

The operative word might be "over the last year". Or the last few years, anyway.
The last while has been remarkably exceptional: the very long run rule has been that the very largest cap stocks are perennial underperformers.
Until recently, the dart board has been by far the better approach to investing.

But not in the last seven years.
Roughly speaking, cap weight top 5 1986-July 2013 underperformed the S&P 500 by -5.7%/year.
August 2013 through August 2020, those five outperformed the S&P 500 by +13.1%/year.
That's a very big switch.

What this suggests for future strategy is unclear.
Will the old normal return, where gigantic valuation was usually a function of being overbought, meaning a fall was due?
Or with the new normal persist, where a few giants have all the monopoly power to print money?

The effect is multiplicative. Many of the giants are very profitable, notably Apple, Microsoft, Alphabet, Facebook, Walmart, Visa, Mastercard.
Then those formidable earnings streams lead to high market multiples.
Those with high (and more importantly high profile) revenue growth but very humdrum profits to date get dragged along in the multiples stakes, notably Amazon, Netflix, Tesla.
The first part, high profitability for some, will probably continue. The multiples? Beats me.

I'm pretty sure that one very old rule will still apply: nothing trades at a high multiple forever.
Sooner or later everything gets a multiple in the teens, and eventually something ordinary like 15.
For some firms with current multiples over 30 or 40, profits have to rise at implausible rates to give a decent return between now and whenever the multiples descend.
There maybe lots of shorter term trading profit to be had along the way.

Jim
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No. of Recommendations: 0
Most value funds are still based on the price-to-book ratio. While informative for old economy stocks, it’s much less useful for tech companies and share repurchasers....

'Value investing is dead' is too extreme of a claim. But I wouldn’t hold out hope for the group of strategies that continue to define a company’s value with last century’s definition....


Are there any quantitative, value ETFs that don't use price to book?

Greenblatt has a value fund that doesn't use price to book: GVALX (0.75% ER).
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No. of Recommendations: 13
Sometimes, simple does pretty well too...

If you take the top 2,3,4, or 5 stocks
in the DJIA that performed the best
over the last 3 or 6 months,
you would have doubled the return
of the SPY ETF from 2009 to now.
See chart below

Even looking at the last 3 years,
you would have done well; 
even taking out AAPL.


To find the winners,
use this link and look for the top
winners in the 3 month (quarter) or 6 month (half) column.
It's sorted on the quarter returns


https://finviz.com/screener.ashx?v=141&t=AAPL,AMGN,AXP,B...

$10K start
monthly trade
2009 thru August
(example, a portfolio by picking the top 5
that did the best looking at
their 6 mo moving average
was at $119K end of Aug.)

Number		months lookback	
stocks	1 mo	3 mo	6 mo
1	$32K	69	37
2	98	115	70
3	67	109	100
4	57	112	105
5	64	93	119
			
	SPY B&H	$49K

above per portfoliovisualizer
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No. of Recommendations: 7
Observations based on only the top 5 dominate players might give a distorted perspective.
Looking at the performance of the top and bottom 100 of the S&P500 by market cap:
Top 100 of S&P500 by MktCap 1957 -2020:
http://gtr1.net/2013/?~sp500_mktcap_top100::sp500.a:et1:MktC...

Bottom 100 of S&P500 by MktCap 1957 – 2020:
http://gtr1.net/2013/?~sp500_mktcap_bottom_100::sp500.a:et1:...

                 TOP 100  BOT 100
CAGR: 10.1 13.9
TR: 44103 392025
SAWR(20; 0.95): 5.9 9.1
GSD(20): 16.9 25.9
DIGSD(20; 0%): 19.0 28.5
LDD(20; 0%): 10.8 15.8
LDDD3: 10.5 12.4
MDD: -55.9 -68.9
UI(20): 12.5 13.9
Sharpe(20): 0.4 0.5
Beta(20): 1.0 1.3
TI(20): 6.4 8.9
AT: 0.8 1.1

And their annual results for last 13 years:
  20081231  -37.9  -41.0
20091231 24.7 99.3
20101231 14.5 26.7
20111230 0.8 -2.5
20121231 16.5 21.7
20131231 35.8 43.0
20141231 14.3 12.6
20151231 1.6 -5.8
20161230 8.7 25.3
20171229 22.1 12.3
20181231 -4.1 -6.9
20191231 28.7 23.9
20200914 4.6 -13.9

CAGR-13 Yr 13.8 17.1


RAM
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No. of Recommendations: 1
Are there any quantitative, value ETFs that don't use price to book?

The following list "Enhanced Strategy (Value)" has some of those. Only took a brief look at a few ETP's Prospectus Stated Objectives. None have a Positive TTM performance today.

Symbol  ETP Name -Enhanced Strategy (Value)               Price      Net Assets

VBR VANGUARD SMALL CAP VALUE ETF $115.35 $13.4B
VOE VANGUARD MID-CAP VALUE ETF $104.88 $9.3B
IWN ISHARES RUSSELL 2000 VALUE ETF $104.60 $8.2B
VLUE ISHARES EDGE MSCI USA VALUE FACTOR ETF $75.90 $7.0B
EFV ISHARES MSCI EAFE VALUE ETF $42.28 $6.1B
PWV INVESCO DYNAMIC LARGE CAP VALUE ETF $35.04 $654.1M
FTA FIRST TRUST LARGE CAP VALUE ALPHADEX FUND $48.68 $649.6M
RPV INVESCO S&P 500® PURE VALUE ETF $51.18 $629.8M
IVLU ISHARES EDGE MSCI INTL VALUE FACTOR ETF $20.50 $466.3M
JKI ISHARES MORNINGSTAR MID-CAP VALUE ETF $137.16 $341.0M
VTWV VANGUARD RUSSELL 2000 VALUE ETF $91.20 $298.7M
JKL ISHARES MORNINGSTAR SMALL-CAP VALUE ETF $111.82 $262.7M
IVAL VALUESHARES INTERNATIONAL QUANTITATIVE VALUE ... $26.04 $95.9M
SPVU INVESCO S&P 500® ENHANCED VALUE ETF $28.54 $71.5M
FYT FIRST TRUST SMALL CAP VALUE ALPHADEX FUND $32.39 $59.5M
FAB FIRST TRUST MULTI CAP VALUE ALPHADEX FUND $49.05 $53.7M
FNK FIRST TRUST MID CAP VALUE ALPHADEX FUND $29.05 $36.3M
DEEP DEEP VALUE ETF $23.31 $22.0M


ETP Type
ETFs
2191
Leveraged / Inverse
Not Leveraged or Inverse
2026
Investment Philosophy
Enhanced Strategy (Value)
47
Inception Date
28 – 3 Years
43
Equity: Price/Trailing Earnings
0.00-18.62
28
Equity: Price/Book
0.00-1.82
25
Equity: Price/Sales
0.00-1.34
25
Equity: Price/Cash Flow
0.00-9.22
25
Equity: Historical Earnings Growth %
0.00% and Above
25
Equity: Sales Growth %
0.00% and Above
25
Equity: Cash Flow Growth %
0.00% and Above
18
Equity: Book-Value Growth %
0.00% and Above
18


GD_
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No. of Recommendations: 3
Take the enhanced strategy (value) ETFs listed by MapG. Add MOAT. At the end of each month, pick the ETF with the best 4-month (84-market-day & admittedly tuned) return. Go to cash if BCC=0.

From 20050713 to 20200914, CAGR = 11.6 with MDD = -34.9 and asset turnover (AT) = 5.65.
http://gtr1.net/2013/?s20041005e20200914h1::dspo%281%29al84:...


Without cashif BCC=0, CAGR drops to 10.1, MDD becomes – 57.2 and AT becomes 5.46. The 2020 year-to-date return is -2.1%.

Buying and holding QQQ over the same interval gave CAGR = 14.5 with MDD = -53.4 and AT = 0. The 2020 year-to-date return is +29.9%.

Not surprisingly, investing in the listed value ETFs hasn't been very competitive. Will it ever be? Will a better value ETF appear? It's so smoky here I can't see the sun let alone read a crystal ball.

Eric
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No. of Recommendations: 3
The following list "Enhanced Strategy (Value)" has some of those [don't use price to book].

I went down your list as far as JKL. The results are below.

TL:DR - All use book to price, with the possible exception of PWV (uses a "rigorous 10 factor style isolation process"). I'm betting one of those 10 factors is book to price. Whatever it does, it hasn't worked so far, PWV lags the lowly Vanguard VTV over all time periods up to 10 years.

I'm not sure how you define "enhanced strategy". Some on the list are the newer "smart beta" type funds, some are the more traditional price to book value funds.

Vanguard
VBR Seeks to track the performance of the CRSP US Small Cap Value Index
VOE Seeks to track the performance of the CRSP US Mid Cap Value Index
CRSP classifies value securities using the following factors: book to price, forward earnings to price, historical earnings to price, dividend-to-price ratio and sales-to-price ratio.
VTWV The index selects from stocks ranked 1001-3000 by market cap based on price-to-book-value.

iShares
VLUE MSCI USA Enhanced Value Index - The value investment style characteristics for index construction are defined using three variables: Price-to-Book Value, Price-to-Forward Earnings and Enterprise Value-to-Cash flow from Operations
IWN Value: Trades at a low price relative to: • Earnings (P/E) • Sales (P/S) • Book value (P/B)
EFV MSCI EAFE Value Index - The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price and dividend yield
IVLU selects stocks using a value score calculated from 3 accounting inputs: price-to-book, price-to-forward earnings, and enterprise value-to-cash flow from operations. (not so cap-weighted as EFV)
JKL uses price-to-earnings, price-to-book value, price-to-sales, price-to-cash flow, and dividend yields to screen for value.
JKI uses price-to-earnings, price-to-book value, price-to-sales, price-to-cash flow, and dividend yields to screen for value.

Others
PWV tracks the Dynamic Large Cap Value Intellidex Index. The Style Intellidexes apply a rigorous 10 factor style isolation process to objectively segregate companies into their appropriate investment style and size universe. (Lags VTV over all time periods to 10 years)
FTA NASDAQ AlphaDEX® Large Cap Value Index by ranking the eligible stocks from the NASDAQ US 500 Large Cap Index on growth factors including 3-, 6- and 12- month price appreciation, sales to price and one year sales growth, and separately on value factors including book value to price, cash flow to price and return on assets.
RPV The “value score” is measured using three factors: book-value-to-price ratio, earnings-to-price ratio, and sales-to-price ratio.
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No. of Recommendations: 1
The following list "Enhanced Strategy (Value)" has some of those [don't use price to book].

I'm not sure how you define "enhanced strategy". Some on the list are the newer "smart beta" type funds, some are the more traditional price to book value funds.


Ok! The screener has no filter specifically for exposure to "price to book" of these ETF funds and the degree of exposure is therefore unknown. Still some Value criteria exist other than just "price to book".

Investment philosophy
A classification of a fund's overall strategy that guides its investment principles. Examples include the use of a passive or enhanced index or a benchmark for use in an actively managed fund. It is updated by XTF as necessary and as stated in the prospectus.

Investment philosophy (Passive Index) — Passive Index is an index designed to track a segment of the market by holding either all of the securities or a “representative” sample without attempting to weight or select the securities in order to deliver excess returns.

Investment philosophy (Enhanced Index) — Enhanced Index is an index designed to track a segment of the market by holding either all of the securities or a “representative” sample while attempting to weight or select the securities in order to deliver excess returns.

Investment philosophy (Actively managed) — An ETP that does not follow any particular index. The fund manager actively selects the components and assigns weights using a methodology that falls within the parameters of the investment objective as stated in the prospectus. A benchmark can be assigned to evaluate the funds performance.

Investment philosophy (Socially Responsible Index) — Socially Responsible Index is based on a methodology that picks or rejects constituents based on religious, social or environmental views.


GD_
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No. of Recommendations: 1
The screener has no filter specifically for exposure to "price to book" of these ETF funds and the degree of exposure is therefore unknown. Still some Value criteria exist other than just "price to book".

Sure. Most also use price to earnings. Some use dividend-to-price ratio, which is a head scratcher.

Investment philosophy (Enhanced Index) — Enhanced Index is an index designed to track a segment of the market by holding either all of the securities or a “representative” sample while attempting to weight or select the securities in order to deliver excess returns.

Thanks.
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No. of Recommendations: 31
tpoto:
If you take the top 2,3,4, or 5 stocks in the DJIA that performed the best over the last 3 or 6 months, you would have doubled the return of the SPY ETF from 2009 to now.


As expected, this turns out to be completely false. In fact, the 5-stock, 6-month lookback variant you highlighted actually loses to SPY over the period in question.


20081231 to 20200918
Avg Min Max SD SPY
CAGR: 13.69
10.94 15.30 1.27 13.99
TR:
352.43 237.05 428.89 56.51 362.78
SAWR(20; 0.95): 10.92 8.44 12.40 1.14 11.83
GSD(20):
20.15 19.66 20.61 0.33 17.79
DIGSD(20; 0%): 23.04 22.37 23.91 0.44 21.41
LDD(20; 0%): 12.70 12.17 13.29 0.32 11.73
LDDD3: 6.36 5.45 7.64 0.56 4.68
MDD:
-33.57 -36.64 -31.57 1.52 -33.72
UI(20): 6.43 5.67 7.39 0.42 4.92
Sharpe(20): 0.77 0.64 0.85 0.06 0.87
Beta(20):
0.97 0.95 1.00 0.02 1.00
TI(20): 14.47 12.09 15.92 1.12 13.96
AT: 4.49 4.20 4.67 0.11 0.00

Total Return for Year Ending:
20091231 7.98 -4.40 23.21 7.86 26.35
20101231 19.22 15.09 26.30 2.89 15.06
20111230 1.40 -5.92 7.69 4.36 1.89
20121231 5.75 -1.16 11.56 3.07 15.99
20131231 31.94 27.82 37.31 2.54 32.31
20141231 11.50 6.27 16.12 2.65 13.46
20151231 12.64 7.32 17.62 2.40 1.23
20161230 8.59 2.51 23.23 4.84 12.00
20171229 37.73 30.79 42.80 2.96 21.71
20181231 8.47 2.80 13.12 2.91 -4.57
20191231 13.29 4.22 20.03 4.92 31.22
20200918 7.60 -0.32 14.62 3.65 3.83

DJI TR126 Top 5: http://gtr1.net/2013/?s20081231::dji.a:et1:dspo%281%29al126:...
SPY: http://gtr1.net/2013/?s20081231::SPY


The reason for the discrepancy between our results is simple: What you've posted aren't backtest results--they're the crystal ball effects of assuming that the current list of DJI constituents could have been known to investors at the end of 2008. I.e., they're garbage.

For any newcomers who think I'm being overly harsh in my response, tpoto has a long history of misleading posts based on crystal ball effects and ignoring constructive criticism, no matter how gently it's delivered. My reply is for the benefit of others, not his. But as I've said before, if he doesn't want his posts challenged, then he should stop posting disinformation on a message board whose mission is to educate.

Robbie Geary
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No. of Recommendations: 6
There will be no bashing of your fellow Fools nor any attempt to suppress other Fools from posting.

Fuskie
Who notes Fools are free to disagree but it should be done respectfully and constructively..

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