Forget momentum crashes, worry about value traps

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
                         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

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


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

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

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


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


About mcturra2000

Computer programmer living in Scotland.
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2 Responses to Forget momentum crashes, worry about value traps

  1. MrContrarian says:

    What period is that over?

    • mcturra2000 says:

      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.

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