Magic Formula, netnets and other quantitative strategies

[netnet]

Has anyone run across or done a comparison of any of the mechanistic, quantitative value strategies during the last 18 months or so?

 

I was wondering how say the Magic Formula approach has performed over this cycle.  (I would do it myself, but the Magic website does not give let you evaluate choices from a year ago.)  When I was evaluating it, I added some criteria which increase returns, but frankly it was too mechanical for my tastes(which is part of the reason why it works!)

 

 

Netnet--that's the name not the strategy!

[mpauls]

I'm sure I'll get some resistance from this.  There is no magic formula.  

 

Each situation is different.  Each company is ultimately valued differently.

[netnet]

I'm sure I'll get some resistance from this.  There is no magic formula.  

 

Each situation is different.  Each company is ultimately valued differently.

 

Mpauls, the specific reference is to Greenblatt's ranking methodology, see his bookThe Little Book that Beats the Market,

unless you mean that you can not use any quantitative screen, which would be a pretty bold statement, given the evidence, see for example the Tweedy, Browne articles on stockmarket performance versus value ranking!  If you can't use quantitative ranking methods, then how do you compare companies? 

[mpauls]

I'm aware of greenblatt.  Sure Quantitative screens can work, you'll do a few points better than the market, but not substantially so.  Sorry, but I don't talk openly about the details of my approach, but you can guess the derivation thereof.  

[Guest kawikaho]

One problem I have with well known quantitative strategies is that, well, they're WELL KNOWN.  If you have an edge against other poker players with a proprietary strategy, why give away your edge by revealing it?  You would have no edge at that point. 

 

The Dogs of Dow method, before it became well known, was shown to have outperformed the Dow by a wide margin.  After the method was published, people started following the strategy.  Someone, I forgot who, did a study about the recent under performance of the Dogs of Dow and showed that the period of under performance coincided with the wide publication of its approach.