Everyone knows momentum investing is for adrenaline junkies with ADHD, and value shares are for serious investors and are less risky, right?
Well, maybe not. I took a look at Stockopedia’s screen draw-downs in each of their categories, and calculated the median for each group. Momentum and growth actually had the least draw-downs, whilst value and bargains had the most. Here are the stats:
In %age terms
QUALITY INVESTING
max[1] ret[2]
muhlenkamp roe -26.0 20.4
buffett hagstrom -18.7
pio f -16.2 13.5
buffettology sustainable -19.2
greenblatt -25.2
screen of screens -16.1 16.2
buffettology historical -20.2
r&d -25.7
cash accruals -23.9
median -20.2
GROWTH INVESTING
lynch -42.0
can-slim -23.9 28.3
zulu -17.0
naked trader -12.7 24.7 *
cornerstone growth -18.0
garp -19.6
charles growth -27.2
zweig -19.3
t rowe -14.7 13.1
phil fisher -26.4
median -19.5
VALUE INVESTING
Bill Miller -23.3
david dreman high div -21.2
dreman low price to cash -15.2
dreman low pe -13.1 22.3 *
richard beddard -13.7 18.8
neglected -13.3 12.4
pio f pe -24.9
james cornerstone value -20.7
dreman low pbv -46.9
templeton -26.1
charles value -44.5
graham enterprising -41.8
pio f pbv -57.9
neff -37.1
fisher -65.5
median -25.5
BARGAIN STOCKS
graham defensive -39.2
charles bargain -26.2
free cash flow cows -39.9
graham ncav -29.9
graham net nets -36.5
negative -65.3
trading below cash -46.5
schloss -58.2
median -39.6
INCOME INVESTING winning growth and income -9.9 29.6 * large cap div -28.9 best divs -12.0 dividend achievers -13.5 23.5 * weiss -37.3 dividend dogs forecast -16.9 13.0 quality income -20.7 pyad -23.8 dividend dogs -29.9 median -20.7 MOMENTUM INVESTING 52w high -15.0 14.9 tiny titans -12.0 26.1 * josef lakon -14.6 18.1 price momo -28.9 earnings surprise -28.5 value momo -13.9 21.1 * richard driehaus -14.7 20.4 * earnings upgrade -33.3 bold earnings -16.3 median -15.0
[1] maximum drawdown
[2] annualised return
.
Some particular standouts that caught my eye: income investing using winning growth and income provieded outstanding returns for very little risk. There were a few value investing strategies that did have low draw-downs, so it’s not all bad news. The bargain screens would have crushed you. Schloss was the worst, having a draw-down of -58.2. Richard Driehaus, which is a momentum screen, might be considered risky, doubly-so considering it has very low diversification. Despite that, there were no particular disasters.
Edit 18-Dec-2015: Asterixed some of the best-looking strategies
What period is that over?
Good question. I’m usin the figures as reported by Stockopedia, so I take it to be the lifetime of the portfolio. You can see in the Winning Growth & Income strategy, for example, that although it has had its sluggish periods, it hasn’t done the swooning that some of the other funds have.
Contrariwise, the Greenblatt screen has been a rollercoaster. The problem is, it has been picking things like Russian internet companies. No wonder it has all ended in tears.
So I can be reasonably confident that the results are meaningful.