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No. of Recommendations: 7
VLUE included in your assessment above? Likely so

Sounds better than some.
Price to book is, as mentioned, not a very good hunting ground.
Price to forward earnings makes a lot of sense. Probably more than anything else.
Enterprise value to cash flow from operations is an interesting choice. Not crazy.

But it hasn't been a way to get rich so far.


This reminded me of a similar screen (post 281959). Just like $VLUE, the screen {kindaLikeVLUE} applies three valuation ratios on a sector relative basis:
A. Forward price to earnings
B. Enterprise value/operating cash flow
C. Price to book value

I changed {kindaLikeVLUE} to check which of the 3 multiples worked best since 1997. Price to book (C) had the lowest CAGR. Enterprise value/operating cash flow (B) had the highest CAGR.

Screen             CAGR  SAWR  GSD  LDDD3  MDD  UI  Sharpe  Beta   AT
kindaLikeVLUE_B 11.5 8.3 20 11 -56 11 0.61 1.0 0.58
SP1500EqualWeight 11.0 8.3 24 12 -60 12 0.52 1.1 0.37
kindaLikeVLUE_AB 10.9 7.9 20 12 -57 12 0.57 1.0 0.54
kindaLikeVLUE_BC 10.6 7.6 22 13 -61 13 0.54 1.1 0.56
kindaLikeVLUE_ABC 10.6 7.6 21 12 -60 13 0.54 1.0 0.54
kindaLikeVLUE_A 10.1 7.4 21 12 -59 13 0.52 1.0 0.53
kindaLikeVLUE_AC 10.0 7.2 22 13 -62 14 0.50 1.1 0.53
kindaLikeVLUE_C 9.9 7.1 23 14 -64 14 0.49 1.1 0.52
SP500MktCapWeight 9.0 5.1 18 12 -54 15 0.49 1.0 0.30

http://gtr1.net/2013/?~SP1500EqualWeight:h63f0.4::sp1500.a:e...
http://gtr1.net/2013/?~kindaLikeVLUE_20180323_borisnand:h253...
http://gtr1.net/2013/?~kindaLikeVLUE_B:h253f0.4::styp.a:et11...
http://gtr1.net/2013/?~kindaLikeVLUE_AB:h253f0.4::styp.a:et1...
http://gtr1.net/2013/?~SP500MktCapWeight:h63::sp500.a:et1:ra...

There's not much difference in the results of {kindaLikeVLUE_B} and S&P 1500 equal weight. The difference in 5-year CAGRs bounces between -4% to 4%, and is now less than 1%. This supports the idea that properly defined value is not underperforming. Instead, a few mega cap stocks have been outperforming.

                                                               kindaLikeVLUE_B
year kindaLikeVLUE_ABC kindaLikeVLUE_B SP1500ew SP500mc excess R
1998 13 21 6 30 15
1999 6 17 11 20 6
2000 11 8 14 -9 -6
2001 11 6 10 -11 -5
2002 -16 -15 -15 -22 0
2003 37 34 44 29 -11
2004 22 20 19 11 2
2005 17 16 8 5 8
2006 20 17 16 16 1
2007 5 10 -1 6 10
2008 -39 -36 -36 -36 -1
2009 37 36 46 27 -9
2010 17 17 26 15 -10
2011 -1 0 -1 2 1
2012 14 12 18 16 -6
2013 41 39 39 32 1
2014 17 18 9 14 9
2015 -7 -7 -5 1 -2
2016 20 20 24 12 -3
2017 20 20 14 22 6
2018 -13 -9 -10 -4 1
2019 26 26 25 31 2
2020 5 11 14 19 -3
2021 25 26 27 21 -1

CAGR 10.3 11.3 10.8 8.8
avg 11.9 12.7 12.5 10.3
sd 18 17 19 17
correl 0.98 1.00 0.94 0.91
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