When the market favors value, buy an ETF on value stocks, and vice versa. You can determine the trend of the corresponding ETF via SMA-10 and SMA-50 from Finviz.
The following is my test results using EY, Expected Earnings Yield (Price/Expecting Earnings) and a Timing Rank provided by a vendor. EY is a primary value matric.
The data could be a little off and they are used for illustration purposes. I am not responsible for any errors.
I included the stocks in the three major exchanges only. I had 4 tests in 1 year for 2 years. I selected the top 10 stocks or less if not available and got the return after one year (usually a few days off). RSP (an evenly weighted ETF for the S&P 500 stocks) is used as a yardstick.
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|
EP |
Timing Rank |
RSP |
|
01/03/2019 |
58% |
2% |
29% |
|
04/01/2019 |
120% |
-40% |
-24% |
|
07/01/2019 |
-49% |
7% |
-6% |
|
10/01/2019 |
-26% |
14% |
2% |
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|
|
|
01/03/2020 |
-9% |
152% |
9% |
|
04/01/2020 |
540% |
71% |
79% |
|
07/01/2020 |
388% |
83% |
49% |
|
10/01/2020 |
186% |
7% |
40% |
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Average |
151% |
37% |
22% |
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Comments.
· The market has been great for these two years. It is obviously a bull market. Performances are better by selecting stocks (active management) than buying the entire S&P 500 stocks.
· Value investing is better than Momentum investing during the test periods.
· I double checked on the incredible 540% and 186% returns and I did not find any error.
I also find the percentages of losers, maximum and minimum values for both EP and Timing Rank (not listed here).
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