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Strategies & Market Trends : What Works on Wall Street (O'Shaugnessy)
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To: sjemmeri who wrote (67)3/9/1998 11:50:00 AM
From: Howard R. Hansen  Read Replies (1) of 109
 
In O'Shaughnessy book "What works on Wall Street on Page 255 and 256 he states the Cornerstone Growth approach is:
1 Select 50 stocks.
2 Come from the All Stocks Universe
3 Have earnings gains for 5 consecutive years.
4 Have a price-to-sales ratios below 1.5.
5 Display the best 1-year price performance in the all Stocks group.

Where as in the prospectus for Cornerstone growth fund it states the Cornerstone Growth Strategy is:
1 Select 50 stocks.
2 Come from the All Stocks Universe
3 Have the highest 1-year price performance at the date of purchase.
3 Have annual earnings that are higher than the previous year.
4 Have a price-to-sales ratios below 1.5.
5 Have a historical trading volume sufficient to allow for the fund to purchase the required number of shares as of the Re-Balance Date.

Because there is a big difference in the number of years the earnings must be increasing between the Cornerstone Growth Strategy in the book and the mutual fund I was wondering if anybody has seen any historical data on well the Cornerstone Growth mutual fund strategy has performed when compared with the Cornerstone Growth book strategy.

Also is anybody else suspicious about selecting stocks with the highest one year price performance at the date of purchase? In 1997 this was a poor strategy and I suspect a holding period of one year is to long of a period to use price momentum as a strategy.
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