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AAII Stock Screens 2014 Review: Active Strategies Lag by Wayne A Feature: AAII Stock Screens ©2015 by the American Association of Individual Investors, 625 N. Michigan Ave., Chicago, IL 60611; 800-428-2244; www.aaii.com. AAII Stock Screens 2014 Review: Active Strategies Lag By Wayne A. Thorp, CFA Article Highlights • The record highs set by the Dow and the S&P 500 were not matched by active strategies or many stocks. • Though 36 AAII screens were up last year, just eight beat the S&P 500 as mid-cap and small-cap stocks underperformed large- cap stocks. • The Rule #1 screen was the best-performing screen in 2014, with its passing stocks gaining 50.3%. strong gains to filter across stocks of all Last year was decidedly a sizes impacted the results of many of the more mixed year for stocks than strategies. the headlines suggested. Valuations also provide some back- As record highs were established by ground color to this year’s market and the Dow Jones industrial average and the stock screens performance. The S&P 500 S&P 500 index, small-cap stocks and ac- stocks tracked by AAII’s Stock Investor Pro tively managed strategies lagged. We saw fundamental stock screening and research this differential play out in the performance database program were trading with a of the AAII stock screens, with price gains for many of our median price-earnings ratio of 21.3 at the end of November, strategies coming in below the performance achieved by the nearly equal to last year’s 21.1. Over the last five years, the measures of large-cap stock performance. average median price-earnings ratio for the S&P 500 is 17.7. The U.S. economic backdrop was favorable to stocks Based on 2015 forward earnings, the median price-earnings during the year. The U.S. unemployment rate fell to 5.8% ratio for the S&P 500 is a more reasonable 16.8. The S&P in November 2014, compared to 7.0% in November 2013. 400 Midcap is trading at an even richer valuation. As of The Federal Reserve’s Federal Open Market Committee, now November 28, 2014, the median price-earnings ratio for overseen by Janet Yellen, viewed economic conditions as mid-cap stocks was 22.5, compared to the five-year average strong enough to end its quantitative easing program (QE3). median price-earnings ratio of 17.7. On a forward basis, Measures of large-cap stock performance responded with the median price-earnings ratio is 17.2, again based on 2015 a banner year in terms of performance. The Dow notched earnings. Lastly, the S&P 600 Smallcap stocks were trading 34 record high closes as of our publication date, while the with a median price-earnings ratio of 23.4 as of the end of S&P 500 has recorded 49. The NASDAQ Composite index November. The five-year average median price-earnings ra- also reached 14-year highs, although it remained below its tio for these small-cap companies is 18.7, while the forward all-time high set back on March 10, 2010. Through the end price-earnings ratio based on 2015 projected earnings is 17.0. of November, the S&P 500 is up 11.9% for the year. As shown on page 7, large-cap growth stocks dominated The Rankings last year. The S&P 500 Growth index experienced a total return of 16.0% through the end of November, compared The 2014 results of AAII’s stock screens provide further to an 11.9% total return for the S&P 500 Value index. While evidence that record highs by measures of large-cap stocks the S&P 500 is up 11.9% through November 28, the S&P don’t always reflect broad market strength. Of the 62 different 400 Midcap index has risen 7.5% and the S&P 600 Smallcap screening methodologies tracked on AAII.com, 36 were up for index is up only 1.7%. Since few of the AAII screens have the year through November while 26 were down. Only eight an explicit market-capitalization requirement, the failure of of the strategies we track have outperformed the S&P 500’s January 2015Downloaded from www.hvst.com by IP address 192.168.160.10 on 09/28/2021 5 Table 1. Performance of Stock Screens on AAII.com Average Annual Price Monthly Risk Measures Holdings Price Gain (%) Gain (%) Variability Risk Ulcer Turn- Price Gain (%) 5 10 Since Risk Bull Bear Largest Index Index Avg over Value YTD 2013 2012 2011 2010 Yr Yr Incep Adj Mkt* Mkt* Gain Loss (X) (%) # (%) Graham—Enterprising Investor Revised 34.0 2.1 (4.9) (4.1) 32.9 11.5 24.2 21.9 15.3 353.0 (49.9) 36.4 (22.4) 1.75 14.7 9 26.0 Graham—Defensive Investor (Utility) 15.1 10.0 1.2 8.6 4.6 9.0 7.2 8.2 8.3 77.4 (31.4) 12.0 (13.4) 0.94 9.9 18 13.9 Price-to-Free-Cash-Flow 11.5 97.8 1.1 (7.0) 39.2 25.4 17.7 20.7 14.5 777.9 (62.8) 51.2 (31.7) 1.78 16.0 30 22.1 Dogs of the Dow 10.1 27.9 9.6 10.7 19.4 15.7 3.5 3.3 2.6 210.2 (69.0) 17.1 (23.4) 1.22 23.6 10 7.4 Piotroski: High F-Score (8) 7.5 137.6 91.7 (36.4) 138.8 33.9 27.0 30.0 17.8 1,043.2 (53.6) 43.1 (42.0) 2.07 14.7 21 23.6 Weiss Blue Chip Div Yield 7.4 21.3 19.2 7.6 26.9 16.5 10.1 11.1 10.3 203.7 (43.1) 16.0 (16.8) 1.22 11.8 12 24.3 Dogs of the Dow: Low Priced 5 7.4 34.5 15.7 13.1 17.3 18.1 0.2 2.6 0.3 259.9 (82.9) 27.6 (34.8) 1.58 36.7 5 15.3 Cash Rich Firms 4.6 36.6 10.5 (32.8) 14.4 5.0 4.4 10.8 9.6 91.7 (45.6) 17.6 (20.7) 1.38 15.7 29 24.6 O’Shaughnessy: Value (2.0) 29.6 20.3 (11.2) 7.4 8.2 2.2 5.8 5.5 149.3 (69.1) 22.0 (23.8) 1.34 16.5 50 21.7 Graham—Defensive Investor (Non-Util) (8.6) 33.9 18.9 7.0 31.4 16.5 15.5 16.5 13.8 259.0 (52.1) 25.8 (17.3) 1.38 12.3 20 19.5 Fundamental Rule of Thumb (9.4) 46.1 (6.9) (35.2) 17.7 0.1 5.5 13.1 10.4 89.2 (57.0) 33.8 (19.2) 1.71 19.1 50 21.2 Graham—Enterprising Investor (11.7) 9.6 1.1 (1.1) 43.5 6.6 12.6 15.8 11.8 126.9 (50.3) 33.1 (23.4) 1.75 15.8 4 43.1 Magic Formula (12.1) 27.9 7.9 (30.6) 26.6 3.1 4.1 9.8 8.5 130.9 (51.6) 30.7 (22.4) 1.65 16.5 30 23.6 Schloss (17.4) 16.7 13.1 (35.1) 12.5 (3.8) 5.5 9.7 8.2 18.0 (37.6) 27.1 (40.4) 1.92 21.7 12 54.4 Value With Price Momentum O’Shaughnessy: Tiny Titans 21.4 54.4 20.0 (22.9) 21.1 18.4 10.2 25.7 16.5 272.1 (67.3) 37.4 (21.0) 1.93 21.8 25 41.3 Lakonishok 9.2 26.8 7.5 (0.6) 32.7 16.2 14.2 14.4 13.1 219.6 (32.5) 16.6 (17.9) 1.21 10.0 31 90.0 O’Shaughnessy: Growth 0.9 38.7 28.8 (7.5) 21.3 17.1 9.6 16.5 13.1 195.8 (57.2) 18.6 (17.9) 1.52 18.3 50 37.8 O’Shaughnessy: All Cap (1.9) 18.4 12.4 (5.0) 29.4 11.0 7.4 11.0 9.7 118.0 (52.1) 18.4 (21.5) 1.38 17.5 21 34.1 O’Shaughnessy: Small Cap Gr & Val (3.1) 46.8 30.3 (0.3) 26.1 21.4 13.6 18.5 14.3 171.2 (50.6) 18.5 (18.2) 1.53 17.9 25 49.7 O’Shaughnessy: Growth Market Leaders (4.7) 48.5 15.8 (1.2) 15.7 16.2 6.7 7.3 7.1 139.2 (50.5) 13.6 (18.6) 1.23 19.8 10 43.0 Growth Inve$tWare Quality Growth 20.9 30.4 19.7 (9.4) 17.3 16.4 8.9 8.0 7.7 203.8 (44.7) 18.2 (22.0) 1.26 13.3 20 11.5 Dual Cash Flow (2.6) 48.9 5.1 (21.6) 31.0 10.8 6.7 14.0 11.4 182.4 (61.0) 34.7 (23.6) 1.54 17.0 67 31.2 Return on Equity (8.1) 34.2 10.1 (5.7) 32.0 12.4 8.7 12.2 10.9 168.3 (47.2) 14.6 (22.2) 1.29 11.7 32 20.7 Growth With Price Momentum O’Neil’s CAN SLIM 46.4 13.1 18.0 (10.2) (9.6) 9.7 20.1 25.3 16.3 213.1 (10.1) 69.6 (23.1) 1.92 12.2 6 57.1 O’Neil’s CAN SLIM Rev 3rd Ed 44.0 55.2 7.3 (30.1) 42.7 19.0 10.2 18.4 12.9 179.2 (27.8) 52.7 (26.7) 1.86 15.4 8 64.7 O’Neil’s CAN SLIM No Float 2.7 30.8 8.9 (3.9) 20.6 12.1 8.0 16.0 13.3 196.6 (61.6) 23.5 (35.5) 1.40 18.6 16 49.3 Kirkpatrick Growth (1.9) 18.1 (9.8) (11.6) 15.3 2.2 14.5 15.5 10.7 97.5 (38.7) 64.1 (23.1) 2.15 27.7 12 61.7 Driehaus (3.3) 47.7 16.7 (14.1) 65.7 20.0 18.8 13.1 9.4 401.5 (53.4) 51.3 (25.7) 2.27 39.3 14 63.9 Foolish Small Cap 8 (31.6) 32.9 16.9 (14.9) 25.2 5.0 0.5 9.3 7.8 106.3 (67.7) 38.8 (25.9) 2.26 25.0 16 42.7 Growth & Value Rule #1 Investing 50.3 47.1 11.3 (1.0) 40.0 28.2 13.8 14.2 10.7 574.7 (54.0) 27.0 (26.8) 1.81 18.9 13 26.0 Templeton 9.8 29.4 31.0 3.2 22.4 19.7 11.0 11.1 10.1 222.3 (40.0) 14.5 (23.1) 1.26 13.5 21 28.3 Buffett: Hagstrom 8.5 35.4 13.0 8.2 27.7 19.3 12.5 14.9 14.0 227.3 (39.8) 13.2 (19.0) 1.12 9.5 30 19.6 Dreman 8.5 27.6 20.6 (11.7) 22.7 14.0 7.0 11.0 10.1 144.7 (55.0) 23.9 (22.2) 1.25 17.7 21 31.5 Murphy Technology 6.2 39.7 42.3 (29.8) 40.0 16.5 5.8 (1.4) (15.4) 193.0 (58.3) 58.5 (44.9) 2.77 73.9 11 21.1 Fisher (Philip) 5.6 39.5 (0.6) (50.9) 9.2 (2.9) (0.1) 4.4 1.8 64.2 (58.2) 32.8 (27.9) 2.20 28.8 19 32.4 T.
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