1998issue C101-7
Rank rotation, value screens, and ten-stock diversification
The source ranked company variables instead of judging individual company stories, ordered all-stock and large-stock universes by price-to-sales, and bought ten high-dividend-yield names as a diversification floor.
- The source framed stock selection as a systematic ranking of company variables rather than a judgment of individual company stories.
- Decile ranking by price-to-sales produced a staircase of subsequent total returns in both an all-stock and a large-stock universe.
- The same decile procedure showed that profit margins lacked a comparable ordered relationship with subsequent returns.
- A conservative implementation bought the ten highest-dividend-yield names from a screened group and treated ten holdings as the minimum needed for diversification to operate.
Selection as a ranking procedure
The source frames stock selection as a systematic ranking of company variables rather than a judgment of individual company stories.
Price-to-sales deciles
Decile ranking of an all-stock and a large-stock universe by price-to-sales produced a staircase of results.
The lowest price-to-sales deciles had the highest total returns. The highest price-to-sales deciles had the lowest.
Profit margins as a contrast
The same decile procedure showed that profit margins lacked a comparable ordered relationship with subsequent returns.
A ten-stock high-yield sleeve
A conservative implementation bought the ten highest-dividend-yield names from a screened group and treated a floor of ten holdings as the minimum needed for diversification to operate.
That high-yield screen typically concentrated in utilities. It was presented as a bond-proxy sleeve with about 5.5 percent yield and residual equity upside rather than as an attempt to beat the S&P 500.
The available test window
The high-yield test window was limited to records available from 1985 onward because earlier machine-readable data were not retained.
All readings on this track · 16 readings
- 1988A two-rule classroom book of cheapness and new highs
- 1995A supermarket-chain case for yield, trendline, and a written checklist
- 1996Annual normalized-yield rank rotation for cyclical sleeves
- 1996Value filter then rank-rotate as one procedure
- 1997Dow high-yield rank rotation as a testable portfolio procedure
- 1998Low relative P/E plus a trendline reversal for regime-aware stock selection
- 1998Rank rotation, value screens, and ten-stock diversification
- 2001Earnback period ranking for growth-adjusted screens
- 2003Stress-testing calendar yield rotation in a declining tape
- 2003A value overlay and strangle hedge during a growth-led regime
- 2005Unfashionable value versus momentum in the book
- 2007Why premove fundamentals rarely flag tenfold-price moves
- 2012Year-end yield rank rotation with a collapse veto
- 2015A five-name January book from yield and price ranks
- 2017Screening value traps with regime-aware overlays
- 2017A pre-trade fail test for the cheap-looking name