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Going long or going short, the Piotroski F-Score proves its mettle

Monday, Nov 12 2012 by
5

We love the F-Score here at Stockopedia - it's published on every Stock Report and a key metric in our screener.  Why do we love it so much?  Firstly, it's massively well researched, backtested and documented.  Secondly, it's very easy to understand (as a number between zero and nine), providing a quick way to assess a company's  fundamental momentum.  Thirdly, it illustrates persistent 'alpha' year in year out.  How much do portfolios built on the F-Score outperform?  SocGen found that High F-Scoring stocks outperform low F-Scoring stocks by up to 14% per year in aggregate in 4 out of every 5 years.  But we've found this year that spread between expensive low F-Scoring stocks and cheap high F-scoring stocks has been over 50%.

Just to illustrate this,  I thought I'd share this graphic that we put together. It shows the average 'long' Piotroski screen on the Stockopedia website minus the average 'short' Piotroski screen. I've been pretty astounded by the results of this exercise - however theoretical. Considering how volatilile the market has been this year... this 'market neutral' portfolio has provided an exceptionally low volatility return.  

 

If you want to learn about the F-Score try this article that I wrote earlier this year - and there's bags of resources about it on the website - try a quick search here - or you can access all the piotroski screens in the screener here.

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About Edward Croft

Edward Croft

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CEO at Stockopedia where I weave code, prose and investing strategies to help investors beat increasingly corrupt stock markets. I've a background in the City and asset management but now am more interested in programming finance tools for the web.  Traditionally investors online have had very poor access to the best statistics, analytics and strategies for the stock market and our aim is to set that straight. Why can't there be total transparency not only of who has been buying stocks but why? High Quality fundamental information has been prohibitively expensive in the past and often annoyingly dull. People these days don't just want to know the PE Ratio and look at a balance sheet. They expect a layer of interpretation over data. And ideally they want data to be visualised. That's our sole goal... to bring these tools to individual investors around the globe. The other big bugbear of mine is the quality of information that often spreads by word of mouth. People get shepherded in to low quality stocks time and time again due to nothing but a catchy story like "China is huge, this company makes China widgets". Without true fundamental backing for a stock stories are just that... thin air... and as Warren Buffett says - "Its only when the tide goes out that you find out whose been swimming naked". more »


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