Three years ago, a user named F958B looked at a variety of HYP strategies in a post on Motley Fool.
The best strategy was “Method E”:
* Select only non-cyclicals from the FTSE
* Rank by yield
* Select the ten highest
He concluded that the method provided exceptional outperformance with any portfolio size and any time period. The very highest yielding cyclicals are very likely to underperform.
There seems to some ambiguity in the way that you can interpret the strategy, though. Method E requires choosing from the “FTSE”. Presumably he meant the All-Share Index. He also explained Method D, which seems the same as E, but looked at the FTSE 100 specifically. In that case, he concluded that performance was erratic and generally slightly inferior to the FTSE 100.
It may be, though, that I have either misinterpreted, or he has misstated, some of the strategies.
My 2 cents: it seems that the Footsie is a very tough index to beat in its own terms. Damodaran has published findings that large-cap value investors underperform a mechanical large-cap value index. Even Buffett seems to be having problems selecting large-cap stocks.
You can read the full post here: http://boards.fool.co.uk/mc-essex-quotlthypgtit-doesnt-12520886.aspx
