See Which Value Strategy is Pounding the Market

Value Strategy

Q2 for the value strategies have been a disappointment for the most part.

Q1 was strong, but the value strategies that I follow weren’t able to keep up in the second quarter.

At the end of the first quarter, 9 out of the 16 stock screens (60%) were beating the market. That is now down to 5 out of 16 screens beating the S&P500 for a win rate of 31.3%.

Here’s how all the value screens did last year.

The order is sorted in descending order based on the end of year performance.

But first, something important that most people get confused about.

The value stock screens are predefined results free for visitors.

It is not part of the Stock Analyzer package. The Stock Analysis software is a “stock analyzer” providing deep fundamental analysis and valuations.

It does not screen for stocks or perform backtests.

Now that I’ve gotten that clear, let’s continue.

The Value Stock Screener Performances

2013 Performance at the End of Each Quarter

2013 Performance at the End of Each Quarter | Click to Enlarge

You can read up on the idea behind each screen and how it was backtested from the main stock screener page.

Compare last years performance with the Q1 and Q2 performance of 2014 below (descending order).

2014 Q1 Results

2014 Q1 Results Descending Order of Performance

2014 Q2 Results

2014 Q2 Results Descending Order of Performance

Now here are the Q1 and Q2 performances side by side, sorted by the Q2 numbers.

2014 YTD Results Side by Side Descending Order

The Altman Z screen was at the bottom in terms of performance last year (still gained 27%), so it’s good to see it at the top. It also goes to show that one strategy won’t work every single year.

All those claims you see on the internet are mostly lies.

So expect periods of underperformance even with the screens that I have up. And that’s the difficult part with mechanical investment strategies because it’s difficult to know whether your starting point will be a good time or not.

A leap of faith and trust in the numbers and research is required to stick to the strategy.

On the flipside, the Piotroski Best screen as well as the FCF Cow are fairly consistent.

I should really try combining the Piotroski Best and the FCF Cow screen to see what I come up with.

What do you think?

What two screens should I try combining?

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Quick Recap of the Stock Screen Descriptions

Before I go further, let me give you a quick run down of what strategy each screen follows.

Altman Z

Piotroski Best


  • Looks for increasing FCF from the previous year along with inproving FCF/LongTermDebt to find strong companies.

NNWC Increasing

Magic Formula

Graham Formula

  • Searching for stocks where the Graham Formula is less than 66% of the stock price. Looking for a big margin of safety here.

Insider Buys

  • Strategy that follows insider buy and sell transactions. Also include stock options in this screen.


  • Just replicating the original Piotroski score and all the stocks with a score of 9.


Share Buybacks

  • Much like the insider buys screen but uses company share buybacks as signals.

Low Expectations

Graham Checklist


  • Best performing strategy since I started following each one closely. Not for the faint hearted.

Negative Enterprise

  • Another category of cheap companies stockpiled with cash.

A Deeper Look at the Altman Z Stocks

There are some claims that the Altman Z is outdated and shouldn’t be used in this day and age.

Take a look though.

Z = 1.2 X1 + 1.4 X2 + 3.3 X3 + 0.6 X4 +1 X5


X1 = Working Capital / Total Assets

X2 = Retained Earnings / Total Assets

X3 = EBITDA / Total Assets

X4 = Market Value of Equity / Total Liabilities

X5 = Net Sales / Total Assets

Here are the rules for interpreting the Altman Z score.

  • When Z is >= 3.0, the firm is most likely safe based on the financial data.
  • When Z is 2.7 to 3.0, the company is probably safe from bankruptcy, but this is in the grey area and caution should be taken.
  • When Z is 1.8 to 2.7, the company is likely to be bankrupt within 2 years.
  • When Z is <= 1.8, the company is highly likely to be bankrupt.

The Z score itself isn’t as accurate today.

That’s true.

But the ratios (X1 to X5) are useful financial ratios. You can read about each in more detail and how it is used from the Altman Z discussion article.

The Current 2014 Altman Z Portfolio

Here are the stocks that make up the 2014 Altman Z Screen.

All stocks are held for one year with equal weighting.

Even if I believe a stock has reached intrinsic value, it stays. No sells.

The purpose is to keep it objective with minimal expenses.

Stocks that Currently Make Up the Altman Z Stock Screen

Stocks that Currently Make Up the Altman Z Stock Screen

Looking at the results YTD, although the positive and negative stocks are balanced, the winners far outweigh the losers.

Sad to say that I’ve written about SYNA a couple of times already and just waiting for a better marge of safety. Didn’t come down to my buy price.

Maybe I was too strict with the growth and price requirements.

Any stocks in this list that you hold or want to know more about?

20 Stocks from the Altman Z Screen Today

The 2014 Altman stocks may not help you much if you’re looking for cheap stocks.

How about the following?

Remember that these stocks are not from the Stock Analyzer. I use my stock software to further filter down a list like this by calculating the fundamental data and intrinsic value estimates.

Latest Altman Z Stocks | Click to Enlarge

We’ll see whether Mr Altman Z can keep it up to the end of the year.

  • So which two screens do you think will work well when combined? Far too many combinations to try everything.
  • Do you hold any of the stocks mentioned here?

Disclosure: None

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