Momentum and value investing strategies were hugely successful in 2013, with small and mid-cap stocks catching the attention of investors and many of them seeing huge price gains as a result. By comparison, screens with demanding ‘quality’ criteria were often lost in all the excitement but with it could be precisely this approach to stock-picking that offers investors the best chance of achieving consistent gains in the face of potential market volatility in 2014.
One of the interesting observations from our recent review of Stockopedia’s 60 GuruModels was that Quality screens like the Warren Buffett-inspired Buffettology-esque Historical Growth (+26%) and Joel Greenblatt’s Magic Formula (+24%), while delivering reasonable gains, were off the pace of many other strategies in 2013. In the case of the Magic Formula, the screen actually underperformed the FTSE 100 between January and August. But as Greenblatt noted in The Little Book That Beats The Market:
“…if the magic formula worked all the time, everyone would probably use it. If everyone used it, it would probably stop working.”
Like a number of other Quality screens, it wasn’t until the summer – when the US Fed rowed back from signalling an end to monetary easing…
Disclaimer: Please note all prices are for information only, they should not be relied upon for accuracy or trading. All prices quotes are based on CFD prices and are similar though not always identical to real exchange prices. STOCKTRKR or anybody connected with STOCKTRKR will not accept any liability for loss or damage arising from use of any information/commentary/charts or articles which is provided 'as is' for educational purposes only, nothing contained on this website should be considered as investment advice - please seek proper investment advice from registered financial broker or institution if you wish to trade on global markets and ensure you are familiar with the risks.
