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Strategies & Market Trends : Greenblatt's Little Book That Beats The Market -- Ignore unavailable to you. Want to Upgrade?

To: hivemind who wrote (3)	12/8/2005 11:44:52 AM
From: Paul Senior	Read Replies (1) \| Respond to of 218

Couple of things about the strategy I don't like. But that'd be me, I'm no expert - and my concern doesn't mean the strategy does not work. I will assume the strategy does work and gets better results than I get and with less risk. 1. There's something about lack of diversity in time about Greenblatt's and O'Shaughnessy's strategies. They rebalance after 12 months. So there's no holding a good stock for years as it develops and improves over time (business results and stock results improve). For O'Shaughnessy, I know he did a lot of research, so there's academic and practical support, but I don't like completely turning over the portfolio every 12 months. 2. It's a numbers game where you buy a bunch of stocks - 30 stocks accumulated over maybe 9 months - and the good results from some stocks outweigh the bad results or no results from other stocks. Maybe it'll be one or two stocks that really shoot up - do so well they overcome the mediocre/bad results of many other stocks selected. My issue is with "30". I would like to know if that is the optimum number from an academic perspective or if it's really a higher number that's optimum. That is, the more stocks a person selects from the many, many available in the screen, the better the likelihood that more of them might turn out to be the rare huge winner that might make the portfolio. I suspect that the number 30 was chosen because it works okay, nobody will really criticize it for diversity, and that if it's so that a higher number really is optimal - like 100 or more - then telling people that would really turn them off from using the system -what public (potential book buyers) is going to have the money/time/patience/willingness etc. to buy 100+ stocks? Anyway, as I say, just MY concerns.