Computerized Investing > September/October 2006

Editor's Outlook

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by Wayne A. Thorp

In this issue, Cara Scatizzi examines the investing principles outlined in James O’Shaughnessy’s latest book “Predicting the Markets of Tomorrow: A Contrarian Investment Strategy for the Next Twenty Years.”

O’Shaughnessy believes that one can predict the future direction of the market by examining long-term trends. Armed with this knowledge, he contends, you can select stocks to capitalize on the current trends. O’Shaughnessy examined over 200 years of data and found that the market moves in roughly 20-year cycles. Our feature article discusses where in the market cycle O’Shaughnessy believes we currently are as well as which market segments he believes will be most profitable over the remainder of the cycle.

In his previous book, O’Shaughnessy pointed to emotions and a lack of discipline as the main culprits for why investors are unable to beat the market. To overcome these issues, he presented his Cornerstone Value and Growth screens. Our feature article shows that his current research builds on his earlier work, but now focuses more on selecting stocks from among the various market-cap segments that are most likely to do well based on current market trends.

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