This is a low Price to Book based on the writings of David Dreman. He champions a contrarian investment approach based on interpreting market psychology and using value measures to pick stocks that are out of favour with the market. Dreman invests in out-of-favour stocks, often in out-of-favour industries, that he identifies using relatively straightforward metric criteria. "I buy stocks when they are battered. I am strict with my discipline. I always buy stocks with low price-earnings ratios, low price-to-book value ratios and higher-than-average yield. Academic studies have shown that a strategy of buying out-of-favor stocks with low P/E, price-to-book and price-to-cash flow ratios outperforms the market pretty consistently over long periods of time."
Dreman warns that the Price to Book strategy in particular may lead to investing in loss-making stocks, at which one needs to be especially careful, and double-checking a company's financial strength is especially important.
To learn more about this strategy please click here »Dreman is currently the founder, chairman and CIO of Dreman Value Management LLC. Author of 'Contrarian Investment Strategies: The Next Generation'. Regular columnist for Forbes magazine.
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FTSE 100 |
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1 week | -0.1% | -0.3% | -0.1% | 0.4% | 5.1% | 0.2% | 2.3% | 0.6% |
1 month | 0.7% | 3.6% | 1.0% | -8.0% | 8.4% | 3.0% | 6.7% | 3.0% |
3 months | 2.4% | 0.1% | 3.2% | -15.5% | 11.0% | 3.8% | -2.3% | 2.5% |
6 months | -4.7% | -8.7% | -4.1% | -25.4% | -4.6% | -2.0% | -8.8% | -5.0% |
1 year | -10.9% | -17.3% | 13.7% | -46.3% | 23.2% | -3.0% | -7.5% | -0.9% |
2 years | -6.4% | -12.2% | -1.6% | -29.9% | -1.8% | 7.0% | -35.2% | -1.7% |
Annualised | 1.3% | 4.3% | 4.9% | 10.7% | 11.4% | 12.9% | 1.1% | |
Risks | ||||||||
Max Drawdown | -46.9% | -26.8% | -43.1% | -58.1% | -29.8% | -18.0% | -45.0% | |
Avg Holdings | 8.4 | 24.3 | 25 | 7 | 4.3 | 25 | 5.3 | |
Diversification | Moderate | Good | Good | Low | Low | Good | Low |