For all you stock pickers out there…
Remember the Dogs of the Dow? How about the Foolish Four? Now we have the Robot Portfolio.
I saw this in a Canadian paper, the National Post, Jan 4, 2006, by John Dorfman, who writes for Bloomberg. The same article can be found at http://www.dorfmaninvestments.com
Dorfman has a program called Robot that scans all US stocks with market value over $500 million (about 2,100 of them). Unprofitable companies and those with more debt than equity are eliminated. This leaves about 1,400 stocks. From the survivors, the ten with the lowest PE ratio are selected. (Probably trailing PE, but he doesn’t say.) The portfolio is liquidated and rebuilt at the beginning of each year.
Dorfman claims a 727% total return over the past seven years (approximately 35%/year on average), compared to 13% total return for the S&P 500 over the same period.