Image via WikipediaA study of 45 years of stock market data shows that some strategies produce greater returns than the S&P 500 while others produce less. A range of strategies were tested with the past data, re-balancing the strategies annually, with each strategy involving the 50 stocks which met the criteria for inclusion.

Here are the conclusions:

• Avoid buying last year's losers each year - as a rule, losers continue to be losers.
  
• Avoid buying companies on high multiples such as high price to sales ratio.
• Buy companies with high relative strength (shares that are rising) in combination with a value factor such as low p/e or low price to sales ratio (overlooked or out of favor sectors or old economy).
• Low price to sales stocks tend to out-perform the higher p/s stocks.
• Low price to cash flow stocks tend to do better than high p/cash flow stocks.
• Low price to book stocks tend to perform better than high p/b stocks.
• Price to sales ratio is the best single value ratio to use for buying market beating stocks.
• Last years earnings gains alone are worthless when determining if a stock is a good investment.
• Large well known stocks with high dividend yields tend to outperform the S&P500.
• Relative strength is the only growth variable that consistently beats the market.

Conclusions from James P. O'Shaughnessy's book "What works on Wall Street".

Labels: Stock market, strategies