Legions of fund managers and private investors trying to beat the market through stock picking, so the selection of particularly promising individual stocks. 80 percent of professional investors fail to retail investors should look similar to the balance sheet. Failure in this context means that the yield of a benchmark index for German equities, for example, the Dow is not reached.
This shows that lasting outperformance, in technical circles called "Alpha" (hence the largest user-based U.S. financial portal, called, incidentally, "Seeking Alpha") reach, is damned difficult.
Statistically, however, it is easier to find those stocks that perform extremely weak in the long term. James P. O `Shaughnessy has this in his reference book" What Works on Wall Street "after. The single most important figure that he cites here is the price to sales ratio (PSR). The higher the PSR, the worse the following year the share price development.
The results are highly significant: Who since 1951 at the beginning of the 50 U.S. stocks bought with the highest PSR, it has held for a year and bought it at the beginning of the next year again, the 50 stocks with the highest PSR, which has until December 2003 achieved an average annual performance of 7.2 percent. In contrast, the group "all shares" reached a performance of 14.8 percent. Whoever bought the 50 stocks with the lowest PSR, an annual performance achieved by 19 percent.
Even the average values show the superiority of stocks with low price-sales ratios. The difference is dramatic when one considers absolute dollar amounts. In the "Highest-PSR stocks" strategy was out $ 10,000 during the period just 19 118 U.S. dollars. The group "All of the shares" on the other hand, there were 5.74 million U.S. dollars at the "low-PSR stocks" strategy, even 22 million U.S. dollars (all figures excluding taxes and transaction costs).
The performance differences are not only for extreme values. If we assign all U.S. equities after ascending to the PSR, the PSR ie lowest first, and those with the highest last PSR and divides them into ten equally large groups (deciles) that the performance differences are also just as apparent. This means that the average performance of decile one is better than that of two deciles, which in turn is better than the so three deciles of
In other words, the results are statistically highly significant. Particularly striking is the extreme lower margin of the tenth decile, ie the stocks with the highest PSR. Right here there are usually very many Internet stocks.
Be taken into account must of course in practice, that technology companies can achieve on the basis of their business model (including procurement of software licenses) is significantly higher margins than pure retail companies or industrial companies with high fixed costs and therefore deserves a higher price to sales assessment have.
What is clear though: stocks with exorbitant PSRs (as a guide could be taken as all stocks with a PSR of ten) are toxic and reduce the yield solid, at least when you are bought by buy-and-hold investors rather than pure traders . Rule of thumb: Private investors should avoid stocks with double-digit price-sales ratios in each case.
This shows that lasting outperformance, in technical circles called "Alpha" (hence the largest user-based U.S. financial portal, called, incidentally, "Seeking Alpha") reach, is damned difficult.
Statistically, however, it is easier to find those stocks that perform extremely weak in the long term. James P. O `Shaughnessy has this in his reference book" What Works on Wall Street "after. The single most important figure that he cites here is the price to sales ratio (PSR). The higher the PSR, the worse the following year the share price development.
The results are highly significant: Who since 1951 at the beginning of the 50 U.S. stocks bought with the highest PSR, it has held for a year and bought it at the beginning of the next year again, the 50 stocks with the highest PSR, which has until December 2003 achieved an average annual performance of 7.2 percent. In contrast, the group "all shares" reached a performance of 14.8 percent. Whoever bought the 50 stocks with the lowest PSR, an annual performance achieved by 19 percent.
Even the average values show the superiority of stocks with low price-sales ratios. The difference is dramatic when one considers absolute dollar amounts. In the "Highest-PSR stocks" strategy was out $ 10,000 during the period just 19 118 U.S. dollars. The group "All of the shares" on the other hand, there were 5.74 million U.S. dollars at the "low-PSR stocks" strategy, even 22 million U.S. dollars (all figures excluding taxes and transaction costs).
The performance differences are not only for extreme values. If we assign all U.S. equities after ascending to the PSR, the PSR ie lowest first, and those with the highest last PSR and divides them into ten equally large groups (deciles) that the performance differences are also just as apparent. This means that the average performance of decile one is better than that of two deciles, which in turn is better than the so three deciles of
In other words, the results are statistically highly significant. Particularly striking is the extreme lower margin of the tenth decile, ie the stocks with the highest PSR. Right here there are usually very many Internet stocks.
Be taken into account must of course in practice, that technology companies can achieve on the basis of their business model (including procurement of software licenses) is significantly higher margins than pure retail companies or industrial companies with high fixed costs and therefore deserves a higher price to sales assessment have.
What is clear though: stocks with exorbitant PSRs (as a guide could be taken as all stocks with a PSR of ten) are toxic and reduce the yield solid, at least when you are bought by buy-and-hold investors rather than pure traders . Rule of thumb: Private investors should avoid stocks with double-digit price-sales ratios in each case.
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