Former Professor’s Value Investing Strategies
A former accounting professor at the University of Chicago has become deeply involved in value investing strategies. In the course of his research, he noticed the fact that many stocks with very low price-to-book value were in terrible financial shape and unlikely to survive, thus deserving of their low valuation.
This observation led him to devise a system to filter these low price-to-book stock lists mechanically to weed out the ones that were unlikely to prosper and uncovering the hidden gems.His method is simple and easily duplicated. A stock is s cored by nine criteria that measure the company's performance over the past two years. The stock gets a "1" for each test it passes and a "0" for each test it doesn't. At the end all the scores are added to come up with the Piotroski score, where 9 is a perfect score. Back-testing has shown that stocks with low valuations and Piotroski scores of 8 or 9 vastly outperform the market.
Tags :
Leave a Reply