What works on Wall Street

Extracted from the book

  • Stocks with the worst price momentum are horrible long-term performers
  • Single value factors have vastly better returns and battling averages than pure growth factors. The one exception to this is price momentum and should always be used in connection with a value constraint.
  • Using several value factors offers much better and consistent returns than a single factor.
  • Accounting variables such as accruals to price, asset turnover, external financing, and percentage change in debt offer key insights into which stocks have higher quality earnings. Using Several accounting variables – total accruals to total assets, the percentage change in operating assets, total accruals to average assets, and depreciation expense to capital expense – improve the quality of stocks and the return.
  • Consumer staples and utilities offer investor excellent returns at low levels of risk by focusing on value factors and shareholder yield
  • buying wall street’s current darlings with the richest valuation is one of the worst things you can do.
  • A simple strategy that buys the 25 best-performing stocks based on six-month price momentum from the stocks scoring in the upper 10 percent of value composites earn more than 20 percent per year since 1963

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