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.