Don, thanks for the news about your mechanical short-picking strategy. And nice to hear from you again. :-)
Your scheme reminds me of one that AOL-TMF posters devised a couple of years ago. One guy wanted to use Value Line's #5 timeliness stocks. He wanted to narrow the list down to just a few so that an individual can short them all. (That's what you are doing, by further filtering based on Zacks #5 ratings, which indicates rapidly dropping analyst ratings.)
Ultimately, he and I figured out a very easy way to narrow down the VL #5 list. On the page of the VL booklet where they list the #5 timeliness stocks, they also listed the dividend yield and p/e. By picking only the stocks that had zero yield and NMF p/e, we found that we got only the the VL stocks with the shakiest cash situations. This was easy, because it required only looking at a single page of a VL booklet.
That guy made a paper portfolio, and followed it for several months (much as you did) and he got quite a good return, something like 10% per month, on the shorts. It should be easy to backtest this scheme if one had the old VL reports.
His scheme picked different sorts of stocks than yours, I imagine. His would not pick Boeing, for example, because it pays a dividend.
Please let us hear more about your scheme as it develops! |
