06-01-2015, 06:51 PM
Would you mind explaining the actual process of reaching scores 6 or higher? You check the dividend yield of the stock, then you check that that yield is greater than the yield to maturity of the 10 year note. Is that correct? How do you come up with a score greater than 6?
(06-01-2015, 05:44 PM)800peace Wrote: There's a genius accounting Prof. named Piotroski, and he created a brilliant financial statement analysis. Piotroski started with the observation made by Ben Grahm that stocks priced low on a price-to-book basis tended to outperform the market. Admittedly, many companies cheap on a price-to-book basis, are really a red flag that failure is on the horizon. Piotroski found a way to separate winners from losers using historical financial statements.
Piotroski's investment strategy applies a nine criteria binary scoring system to the cheapest 20% of the market on a price/book basis. A score of 7, 8, or 9 suggest taking a long position. A score of 1, 2, or 3 suggest taking a short position.
In Piotroski's article he suggest further research be done with different valuation metrics other than price-to-book. I've decided to replace the price-to-book criteria with "Current Dividend Yield > Yield to Maturity of the 10-yr T-Note." Accepting scores >6, I accomplish alpha and a 23% CAGR of dividends since 01/1999.