James Montier Trinity of Risk Screen 11 Qualifying in UK

James Montier Trinity of Risk is a short selling strategy that uses rules suggested by economist and equity strategist James Montier, who wrote Value Investing. He based the approach on three risk factors highlighted by value investor Benjamin Graham: Valuation Risk, Earnings Risk and Financial Risk. It identifies companies that could be overvalued, have poor quality earnings and might be financially distressed. Specifically it uses the Graham & Dodd price-to-earnings ratio and looks for companies that are reporting exceptionally high earnings growth but fail the Altman Z Score of balance sheet risk. James Montier wrote: "Risk isn't a number, it is a concept or a notion? Rather than running around obsessing on the pseudoscience of risk management, investors should concentrate on understanding the nature of this trinity of risks." Short selling shares can be very risky but the Trinity of Risk can still be used as an indicator of which stocks should be avoided.

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This is an independent study based upon the methods of...
Picture of James Montier

James Montier

Former head of Global Strategy at Société Générale, now works for GMO. Author of 'Behavioural Investing' & 'Value Investing: Tools and Techniques for Intelligent Investment'.

Value Investing: Tools and Techniques for Intelligent Investment

by James Montier

The seductive elegance of classical finance theory is powerful, yet value investing requires that we reject both the precepts of modern portfolio theory (MPT) and pretty much all of its tools and techniques. This book explains how value investing is the only tried and tested method of delivering sustainable long-term returns.

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

  • P/6y Avg Earnings > 16
  • EPS > 2 * EPS 6y Avg
  • Altman Z Score (1) < 1.8
  • Sector not in F inancials, Utilities,

Results are sorted by:

  • Altman Z Score (1) in ascending order

And limited to the first 100 Results

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Performance Tracking

Returns FTSE 100
1 week -0.9% 0.2% -0.2% 1.0%
1 month -4.9% -2.2% -3.9% -0.4%
3 months 9.9% 3.7% 43.0% 6.9%
6 months -2.1% -1.4% -17.2% -8.0%
1 year 44.8% 0.7% -16.2% -5.0%
2 years 28.3% 2.2% - -3.7%
Annualised 10.9% 5.7% -10.1%
Max Drawdown -36.5% -20.8% -48.2%
Avg Holdings 10.1 24.9 24.9
Diversification Moderate Good Good

 Studies based on equal weighted portfolios 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.

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Ticker Name Mkt Cap £m P/6y Avg Earnings EPS 6y Avg Altman Z Score (1) Sector
Subscriber Subscriber Healthcare
Subscriber Subscriber Consumer Cyclicals
Subscriber Subscriber Energy
Subscriber Subscriber Energy
Subscriber Subscriber Energy
Subscriber Subscriber Industrials
Subscriber Subscriber Consumer Cyclicals
Subscriber Subscriber Consumer Cyclicals
Subscriber Subscriber Consumer Cyclicals
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.

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  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
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