Full 2011 Value Stock Screen Performance

Written by

Jae Jun

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Full 2011 Year End Value Stock Screen Performances

Compare with 2010 Value Stock Screens

Stock Screen Results Discussion

A much different story compared to 2010. It has been a brutal year for many investing strategies. Of the 13 value stock screens that I track, only two were positive for the year and one was breakeven. The remaining 10 value stock screeners underperformed by big margins.

I wanted to see whether it was just my strategies that did poorly but it seems like AAII didn’t have a good year as well. The most surprising difference between my screen results and AAII was the performance of the Piotroski stock screener. The standard version I have performed well again this year compared to AAII’s -36.7% return.

Screen Settings


For these performance measurements, I use just 15 stocks. On the screener pages, I list 30 just to keep ideas flowing for everyone. Certain volume and price requirements must be met and I’ve tried to weed out Chinese stocks. As always, I don’t include financial companies, REIT’s and holding companies.

Observations and Takeaways of each Stock Screener

Negative Enterprise: Companies that have negative enterprise value are always flush with cash. This criteria became a problem in 2011 when Chinese reverse mergers began popping up everywhere.

These Chinese companies were just loaded with cash and filled the screen. Since reverse mergers are not listed as ADR’s, I couldn’t find a way to weed it out. If this continues to happen, I am thinking of just deleting the screen entirely.

Altman Z Screen: Anything categorized as low quality took a big hit last year. Seems like the majority stuck with high quality stocks which Altman Z score screens for. The screen like all the others tend to focus on small caps and so a -5.8% is acceptable in my opinion.

CROIC and FCF Cows: I was surprised that these two did so poorly. Fundamentals of the companies were strong, returns high, cash flow is positive and strong. The end result was poor. I will have to take a look at the criteria and see whether I have to tweak it.

Graham Checklist & Graham Formula: Decent results. The best as the Graham checklist screen under performed and the Graham formula matched the S&P. Still did very well when compared to the others.

Graham emphasized that investing shouldn’t be rocket science and it was best to keep it simple. His methods are proving to be correct again.

Insider Buys: AAII also had a horrible year for their insider buy screen. Is it because management is over optimistic and that insiders do not analyze their own company objectively? One issue I found is that screens have a hard time of picking the difference between open market purchases and stock options.

NCAV, NNWC & NNWC incr: NCAV screen was actually a surprise this year. It was the best performer this year, partly due to the end of year run ups from PARL and other micro caps which even I find to be risky more than doubling in the year.

Seeing how NCAV did so well, I would have thought the NNWC stock screen would have done just as good, but since the companies on this screen are more asset based opportunities without a valid business model, it got crushed.

NNWC increasing stocks didn’t fair better. If tangible book value is increasing, then it is expected that the company would be able to earn a return off the increasing book value, leading to higher earnings and stock prices. Not true this year. More monitoring required on this.

Piotroski Screen: Has been a soldier. Consistent and steady. So far the screen has been able to outperform in the good years and not lose too much in bad years. Quality companies based on accounting figures seems to be working.

Share Buyback: Any stock that got hit hard bought shares. Some went onto to further losses. Remember what they say. “Just because it is cheap, doesn’t mean it can’t get cheaper.” How very true. A difficult lesson for me in 2011.

Low Expectations: The market may be expecting little from these companies, but as a contrarian strategy, it certainly did meet my expectations. Healthcare stocks which I would have avoided due to regulatory risk were some of the best performers. These cheap companies in out of favor industries looks like a good strategy to further enhance.

I have not published the low expectations screen yet. It’s on my todo list. Let’s see how these stock screens handle 2012.

  • Floris

    I agree that NNWC did poorly, as my portfolio attests. In terms of the quantitive poor performance over the past 2 years, do not discount the impact the chinese RTO frauds had on the screen. At one point, 50% or more NNWC (or true net nets), were chinese RTOs. These did not offer any MoS, since they are accounting frauds. Taking these out (as any investor should have), would have led to better performance.


  • Jon

    Hi Jae – Interesting blog post. I am surprised by the marked differences between 2010 and 2011. I am not totally shocked by the poor results of some of these screens, especially NNWC, primarily because many companies shown on these screens are valued as such because they are simply poor companies. I only say this because it would be interesting to see the results of a screen that somehow chose stocks that fulfilled more than one category, such as increasing CROIC, high Petrioski score, and a satisfactory Altman-Z score. I’m curious to see which combinations of methods produced the highest returns.

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  • PAt

    Why didnt you readjust/re-balance your portfolio like joel greenblatt does… In this way, probably you would pay some more taxes, but wouldnt end up much in the red…

  • The portfolios were measured from Jan 3 to Dec 30. No need to rebalance since the year wasn’t up. These are all paper portfolios.

  • Jacob

    Regarding CROIC and FCF Cows, it shouldn’t be such a huge surprise these screens performed poorly. The better part of the year was traded based on emotion and sentiment than fundamentals. If anything, these companies (overall) are more undervalued based on their ability to generated cash in a mediocre trading environment and should pop once we get some clarity in the macroeconomic environment.

    Thanks, I enjoy your work.

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