Fork it!

Beneish M-Score Screen 35 Qualifying in UK

This is a short-selling strategy based on Professor Beneish's M-Score - this is a mathematical model that uses eight financial ratios from the company's financial statements to assess the degree to which the earnings may have been manipulated. It is similar to the Altman Z-Score, but it is focused on detecting earnings manipulation rather than bankruptcy. The research suggests that a score greater than -1.78 indicates a strong likelihood of a firm being a manipulator. Here is the link to the original Detection of Earnings Manipulation paper as well as the subsequent paper - The Relation between Accruals and Earnings Manipulation. The screen below highlights companies that have had a M-score above the threshold for two years in a row in order to reduce the likelihood that a given year's result is coincidental or a rogue data input error. To learn more about this strategy please click here »

Picture of Messod Daniel Beneish

About Messod Daniel Beneish

Professor of Accounting at the Kelley School of Business, Indiana University.

Detection of Earnings Manipulation

by Messod Beneish

In his "Detection of Earnings Manipulation" paper, Beneish found that the M-Score test could correctly identify 76% of manipulators, whilst only incorrectly identifying 17.5% of non-manipulators. In a subsequent 2007 paper -  The Predictable Cost of Earnings Manipulation - Beneish examines the use of the M score as a stock selection technique (over the period 1993-2003). The M-score strategy apparently generated a hedged return of nearly 14% per annum.

This screen is based on a UK dataset. It uses the following criteria:

  • Beneish M Score, Last Yr > -1.78
  • Beneish M Score 1y Ago > -1.78
  • Sector not in F inancials,

Results are sorted by:

  • P/B in descending order


And limited to the first 200 Results


Can these rules be improved? Submit a suggestion »
Want to make your own version? Create a Fork!

Beneish M-Score Screen Graphical History in

Returns

Timeframe Screen Returns FTSE 100 Outperformance
1 week -2.01% -0.25% -1.8%
1 month -4.15% 0.87% -5.0%
3 months -4.08% -2.99% -1.1%
6 months 16.98% 0.75% 16.2%
1 year 33.11% 6.10% 27.0%
2 years -1.21% 14.88% -16.1%
Since inception 14.78% 23.4% -8.6%
Annualised 6.05%

Risk

Maximum Drawdown-31.26%
Average No. of Holdings22.7
Diversification LevelGood

 Chart based on an equal weighted portfolio of max 25 stocks rebalanced quarterly. Qualifying shares below updated daily. Past performance not indicative of future returns.

 Please note that 'short selling' strategies are designed to underperform the market - they are best used for hedging long portfolios rather than for absolute negative returns.


Please subscribe to see the companies that qualify for the Beneish M-Score Screen Strategy.
Plans start from as little as 24.99 per month. 14 day FREE TRIAL available.

35 Qualifying in

Ticker Name Mkt Cap £m Beneish M Score, Last Yr Beneish M Score 1y Ago P/B P/S Sector
Subscriber Subscriber Energy  
Subscriber Subscriber Energy  
Subscriber Subscriber Consumer Cyclicals  
Subscriber Subscriber Technology  
Subscriber Subscriber Consumer Cyclicals  
Subscriber Subscriber Industrials  
Subscriber Subscriber Healthcare  
Subscriber Subscriber Healthcare  
Subscriber Subscriber Industrials  
Subscriber Subscriber Industrials  
Subscriber Subscriber Technology  
Subscriber Subscriber Energy  
Subscriber Subscriber Consumer Cyclicals  
Subscriber Subscriber Consumer Cyclicals  
Subscriber Subscriber Technology  
Subscriber Subscriber Industrials  
Subscriber Subscriber Industrials  
Subscriber Subscriber Industrials  
Subscriber Subscriber Industrials  
Subscriber Subscriber Industrials  
Subscriber Subscriber Consumer Defensives  
Subscriber Subscriber Energy  
Subscriber Subscriber Energy  
Subscriber Subscriber Basic Materials  
Subscriber Subscriber Consumer Cyclicals  
Subscriber Subscriber Energy  
Subscriber Subscriber Technology  
Subscriber Subscriber Energy  
Subscriber Subscriber Energy  
Subscriber Subscriber Industrials  
Subscriber Subscriber Industrials  
Subscriber Subscriber Consumer Cyclicals  
Subscriber Subscriber Industrials  
Subscriber Subscriber Consumer Cyclicals  
Subscriber Subscriber Industrials  

Can't see the share you expect? View this screen as a checklist to find out why.

You should consider the results of any screening process, including this one, as candidates for further research, not as a buy list. Screening helps to narrow a search based on pre-defined criteria. It is not a substitute for independent research reflecting your individual criteria for investing/trading. Please note that the screening criteria used represents Stockopedia's interpretation of the author's investment approach and are not determined or endorsed by the original strategist.