US Strategies Review: Growth investing keeps paying as markets hit new highs

Tuesday, Jul 25 2017 by
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US Strategies Review Growth investing keeps paying as markets hit new highs

The S&P 500 hit new highs again in July. But after a multi-year bull run dating back to 2009, new highs are really nothing new for the index of large-cap US shares. These days headline writers get more animated when the main benchmark loses ground - and there’s never a shortage of headlines warning of an imminent crash.

So for onlookers, the performance of American markets has been exhilarating and terrifying in equal measure. In the eight years since the darkest days of the financial crisis the S&P has risen by 230 percent. Other US indices have also been stretching towards new highs. Among them the mid- and small-cap S&P 400, S&P 600 and Russell 2000 benchmarks.

For the 60 guru-inspired investment strategies tracked by Stockopedia these are interesting conditions. We’ve found over the past five years in the UK that different investing styles outperform during different periods of the market cycle. Our recent review of the screens in the UK showed that small-cap growth strategies had been the big winners so far this year.  So how have the Guru Strategies been faring in the US?


Stockopedia’s long-only GuruModels span a range of investment disciplines - from deep value small-cap bargains to high yield blue-chip income. Each one of the 60 strategies is categorised as either Quality, Growth, Value, Bargain, Income or Momentum. We launched them with US shares in July 2014.

The strategies model the approaches used by some of the world’s best known investors. They’re rebalanced quarterly to ensure the shares in each portfolio match the rules of each strategy as closely as possible. Sometimes the demanding rules of these screens mean that some of them don't always offer up adequate numbers of realistically investable stocks. Also, we don’t account for the drag of trading costs or the bonus of dividend payments.


In terms of performance, all six Guru Strategy categories delivered composite returns of more than 19 percent in the 12 months to the end of June 2017. It was a period when percentage gains across the US indices reached well into into double figures. The S&P rose by 15.5 percent, but it was the tech-heavy Nasdaq Composite which saw the biggest rise, of 26.8 percent.5977468b106f2US_strategies_12_months.png

597746c09a9a5US_guru_categories.png

Guru Strategies 12 Month performance - 30 June 2016 - 30 June…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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5 Comments on this Article show/hide all

Blissgull 25th Jul '17 1 of 5
5
59779347332a1shillerpechart.png

Valuations in the US really do look very stretched.

The Shiller PE for the S&P is now at its second highest level in over 100 years. Today it stands at 30.35, a level only previously seen at the height of the dotcom boom.

In the past the Shiller PE Ratio has been a fairly good predictor of returns over the next decade.

597793b20d065asness-shiller-pes.jpg

One note of caution to bear in mind here is that the last 10 years earnings used to calculate the current level include a period of depressed earnings starting in 2007. As that period drops out of the average PE the Shiller ratio would fall.

Here are some figures.

Current Shiller PE Ratio: 30.35 

Historic Mean : 16.76

Historic Median : 16.12

Min:4.78(Dec 1920)
Max:44.19(Dec 1999)

Some other ratios.

Current PE ratio : 26.22

Mean PE ratio 15.66

Median PE ratio 14.65

59779534d76e6pechart.png

Current Price to Sales ratio 2.15

Mean Price to sales ratio 1.45

Median Price to Sales ratio 1.44

Maximum Price to Sales ratio 2.15 reached today.

597795cfe3bf2pricetosaleschart.png

Price to Book value currently 3.22

Mean Price to Book value 2.75

Median Price to Book value 2.74

5977965e3798dpricetobookchart.png

S&P dividend yield 1.87%

Mean dividend yield 4.38%

Median dividend yield 4.32%

597796dd3fde6yield.png

Data taken from http://www.multpl.com/


While we cannot say that the S&P is on the verge of collapse from these figures, it does seem reasonable to point out that such high valuations have never been sustained in the past.

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underscored 26th Jul '17 2 of 5
1

In reply to post #202099

Careful - Grantham from GMO has an interesting perspective on this. https://www.gmo.com/docs/default-source/public-commentary/gmo-quarterly-letter.pdf

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Matthewflewitt 26th Jul '17 3 of 5

Great article thanks! Is it possible to screen for the second best performing "composite bargain" stocks?

Thanks

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JohnEustace 28th Jul '17 4 of 5
1

Add Howard Marks to the voices calling time on this cycle:
https://www.oaktreecapital.com/insights/howard-marks-memos

Video here: https://www.oaktreecapital.com...

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Blissgull 30th Jul '17 5 of 5
1

It looks more a question of "when" rather than "if."

My guess is very soon.

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