Thursday, January 24, 2008

James O'Shaughnessy - Cornerstone Growth Screen


Since our last post on James O'Shaughnessy's Tiny Titans was so popular, we figured it's time to feature another one - The Cornerstone Growth Screen. We have used performance history from AAII, American Association of Individual Investors.

James O'Shaughnessy's Cornerstone Growth is a mechanical stock screen that uses several factors to find winning stocks:



Price/Sales ratio less than 1.5
1 year EPS growth > 0
3 months relative strength > 50
6 months relative strength > 50
Ranking: 12 months relative strength

Here's the Market Crushing returns from AAII's website (one caveat: it's possible that the AAII screen may differ slightly):

1998: 19.4
1999: 19.5
2000: 11.5
2001: 19.2
2002: 10.1
2003: 90.3
2004: 45.1
2005: 14.4
2006: 17.2
2007: 12.6 - as of 11/30/07


The lazy investor's option: Buy HFCGX, a mutual fund from Hennessy which follows this strategy.

Here's a performance summary from Smartmoney's website. As you can see, it crushes the S&P 500, especially in the bear market years.

Here's Hennessy Funds website, which features HFCGX and others.

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