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Altman Z-Score Screen 200 Qualifying

The Altman Z-Score is a checklist for identifying stocks that might be at risk of bankruptcy. It was created by US finance Professor Edward Altman and detailed in a book he co-authored, called Managing Credit Risk. The Z-Score is a red flag indicator that can be used as a short selling strategy. It analyses five weighted business ratios to estimate the likelihood of financial distress. Broadly, these checks examine a company's asset, strength, profitability, solvency, efficiency and ability to generate earnings. Altman wrote: "The detection of company operating and financial difficulties is a subject which has been particularly amenable to analysis with financial ratios." Tests over 31 years to 1999 found the Z-Score to be 80-90% accurate in predicting bankruptcy one year prior to the event. The Z-Score is one of the components used in another short selling strategy: James Montier Trinity of Risk.

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This is an independent study based upon the methods of...
Picture of Edward Altman

Edward Altman

Professor of Finance at NYU Stern School of Business. Best known for the development of the Z-Score.

Managing Credit Risk: The Great Challenge for Global Financial Markets

by John B. Caouette, Edward I. Altman, Paul Narayanan, Robert Nimmo

Its initial test by Altman found that it was 72% accurate in predicting bankruptcy two years prior to the event, while subsequent examination has shown 80-90% accuracy.

This screen uses the following criteria:

  • Altman Z Score (1) < 1.8
  • Industry Group not in (Banking Services, Investment Banking & Investment Services, Insurance)

Results are sorted by:

  • P/B in descending order


And limited to the first 200 Results


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Performance Tracking


Returns FTSE 100
1 week -2.3% -0.3% 4.1% 3.5% -1.6% 2.1% 7.7% 0.3%
1 month -15.7% -11.4% 8.0% -19.3% -3.5% -7.7% 9.8% -3.7%
3 months -4.4% 3.5% 12.2% -11.6% -12.4% -13.3% 7.9% -8.5%
6 months -3.5% 1.4% 18.2% -26.6% -13.4% -12.9% 25.8% -4.0%
1 year -17.4% -10.6% 24.4% -34.3% -25.9% -20.2% 18.1% -6.8%
2 years -4.7% 4.4% -12.1% -26.9% -38.9% -32.3% 17.2% 0.4%
Annualised 4.8% 1.1% -4.0% 0.8% -11.3% -14.0% 15.4%
 
Risks
Max Drawdown -26.4% -38.2% -44.7% -51.4% -39.6% -41.0% -25.9%
Avg Holdings 24.8 24.9 24.9 25 25 25 25
Diversification Good Good Good Good Good Good Good