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Computerized Investing > May/June 2005

Feature: Changing the Holding Period of AAII Stock Screens

PRINT | | | | COMMENTS (10) | A A   Reset

by John Bajkowski

Many members closely follow the performance of the screening strategies presented in Stock Investor Pro, our stock screening program and research database, and in the AAII Stock Screens area of AAII.com. While the market has seen its performance ebb and flow, some strategies have exhibited surging performance since the inception of our stock screen tracking. We have been testing and tracking a wide variety of screening strategies for over seven years now.

Some of the screens attempt to capture the investment philosophy of famous investors such as Warren Buffett, while other screens explain and implement basic investing approaches—such as investing in stocks with low price-to-sales ratios. It is important to keep in mind that the screens following the approach of a famous investor do not represent their actual stock picks. The criteria for each screen are defined by our own interpretations of the investment approaches. A strategist may or may not actually invest in a passing stock.

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Discussion

Hamilton from NJ posted over 3 years ago:

This is an interesting and potentially relevant article, but appears to have been published 6 years ago. Has there been a continuation of this study over the intervening years? It would be very interesting to see how less-frequent trading would have fared over 2008 and 2009. Some studies I've done looking at decreased trading frequency over that period give significantly differing results depending on the choice of start dates for the trading cycle. Anyone have further insight?


Mark from MD posted over 3 years ago:

Thanks for a useful article. I do follow the screens and use them in my investments, but rebalance semi-annually. In addition to the practical considerations mentioned in your article, most smaller stocks that are identified by many of the screens have a significant spread between bid and ask prices. I would be interested in re-running the analysis in the article with a realistic spread simulated, plus a small commission, as a penalty for each trade. I suspect that less frequent trades would come out ahead of the monthly trades under such a more realistic scenario.


James from OR posted over 3 years ago:

The AAII stock screens are a good starting point for a disciplined approach to stock investing. The biggest problem that I have with them is that they are about 90% fundamentals based with little or no technical analysis ( price and volume chart analysis ). Technical analysis is a significant part of the CANSLIM approach. By omitting technical analysis, the AAII CANSLIM stock screen is not really a very accurate CANSLIM stock screen.

It is interesting how a quarterly holding v.s. a monthly holding period made little difference in the performance of the AAII stock screens. But I do not know why the author thinks buying and selling every month is so impractical.


Craig from CA posted over 3 years ago:

I thought Hamilton from New Jersey had a good point so I used Stock Investor Pro and ran semiannual screens from 1/6/2006 to 1/7/2011 using the Neff screen. During each 6 month period I compared gain or loss of the S&P 500 (actually I used the closing price of SPY) to the average gain or loss for all stocks that passed the NEFF screen 6 months prior. The results are pretty interesting. (I wish I could upload the graph.) Sometimes the NEFF stocks did better on average, sometimes they did worse. Starting in 2006 if I compared the cumulative results of the Neff portfolio with S&P 500, they were as follows: (dates shown are the data extract dates used)

7/10/2006: S&P -1%, NEFF -11%
1/5/2007: S&P +10%, NEFF -7%
7/6/2007: S&P +19%, NEFF +20%
1/4/2008: S&P +10%, NEFF -11%
7/4/2008: S&P -1%, NEFF -21%
1/2/2009: S&P -30%, NEFF -31%
7/3/2009: S&P -30%, NEFF -16%
1/1/2010: S&P -13%, NEFF + 11%
7/2/2010: S&P -20%, NEFF +2%
1/7/2011: S&P -1%, NEFF +25%

Note, these are not the month-to-month results; rather they are the cumulative results at the end of each 6 month period for a portfolio that stays invested in the S&P compared to a portfolio of stocks that is essentially liquidated every 6 months and replaced by the new stocks that pass the NEFF screen. An equal investment is made in each stock passing the NEFF screen. At the end of 2011 the NEFF portfolio did beat the S&P by 25% (not very impressive), but in the down period of the market the S&P portfolio did not drop as quickly as the NEFF. It is almost as though the NEFF portfolio was a leading indicator what would happen in the S&P.


Paolo from IL posted over 3 years ago:

I am surpised to read the Can Slim passing companies: QSII BABY LIFE and so on whereas the passing companies as posted in the AAII site still read MWIV and SMBC. How can I obtain the current names from the main site as well?. Thanks. Paolo Sessa. plsessa7@googlemail.com


Wayne from IL posted over 3 years ago:

We update the passing company lists on or around the 15th of each month. Since the 15th was on a weekend this month, we will be updating the passing company lists later today.


William from IL posted over 3 years ago:

I have read articles on the screens many times but seems like you always leave out some critical details on rebalancing.

For example you say rebalance quarterly or monthly, but Stock Investor Pro provides changes in the screens every week, while your list of passing companies is printed in the middle of the month. So how about these questions. When you publish a list of passing companies in the middle of the month, when are those companies first passing and being added to your analysis? Show a specific example. An example might say, Company xyz passed the screen on September 25th and entered our rebalanced portfolio on October 1st, and then we published it to the list of passing companies on October 15. Something like that would help us understand how and when you are actually measuring performance and how we might use the weekly updates from Stock Investor Pro to approximate the methods and results you talk about when using the screens. I stopped using Stock Investor Pro because I could never seem to get a clear answer on how it is used in the material you publish about the results of the screens.


Paul from IL posted over 3 years ago:

In the same vein as a couple of the above comments here, do I understand that the AAII reported screen results are based on purchases and sales made at the closing price on the last day of the month?

That can't be right but if so the reported results are really not very meaningful as they are not reproducible in real life. If the selections are published on the 15th of the month, no-one is able to purchase at the prior month-end valuation. (Would be nice if we could).

I would like to see results reported based on purchases and sales made at the closing prices on the day following the publication of the stock selections. That would at least come close to simulating, before trading frictions, what your subscribers could hope to emulate.


Paul from IL posted over 3 years ago:

In the same vein as a couple of the above comments here, do I understand that the AAII reported screen results are based on purchases and sales made at the closing price on the last day of the month?

That can't be right but if so the reported results are really not very meaningful as they are not reproducible in real life. If the selections are published on the 15th of the month, no-one is able to purchase at the prior month-end valuation. (Would be nice if we could).

I would like to see results reported based on purchases and sales made at the closing prices on the day following the publication of the stock selections. That would at least come close to simulating, before trading frictions, what your subscribers could hope to emulate.


R from TX posted over 3 years ago:

Paul - your question is exactly along the lines of what I'm thinking. Did you ever get a response?


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