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David Dreman Screens

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David Dreman - 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.. Here follow a selection of stock screening strategies that we have modelled based on the writings of or about David Dreman. These strategies are not endorsed by the author.

4 strategies sorted by
Dreman Low Price to Cash Flow Screen

David Dreman Low Price to Cashflow is a contrarian value strategy developed by the famous US investment manager and author David Dreman in his book Contrarian Investment Strategies. It uses a basic value filter of selecting the cheapest 40% of the market by Price to Cashflow ratio and filtering further for quality according to company size, financial strength and growth. Dreman favours cash flow over earnings: "If we take two companies with similar outlooks, markets, products, and management talent, the one with the higher cashflow will usually be the more rewarding stock. In investing, as in your personal finances, cash is king." Dreman's studies showed that the cheapest 20% of the market by P/CF outperformed the most expensive 20% by 6.8% annually. Dreman cautions towards a buy and hold approach because "transaction costs are often not recognized by investors, but can be very expensive". more »

Value Investing
5 Year Return: 35.4%
David Dreman Low PE Screen

David Dreman Low Price to Earnings is a value strategy developed by the renowned US fund manager and author David Dreman in his book Contrarian Investment Strategies. It uses a basic value filter of selecting the cheapest 40% of the market by P/E ratio and filtering further for quality according to company size, financial strength and growth. Dreman favoured the P/E strategy above all others: "Our money management firm uses the low-PE method as it's core strategy, but also utilizes the other 3 contrarian strategies extensively." Dreman's studies showed that the cheapest 20% of the market by P/E outperformed the most expensive 20% by 6.7% annually. It should be cautioned that Dreman's portfolio did suffer in the 2008 financial crisis due to an overweighting of low P/E banks. Dreman though continues to evangelise the power of contrarian investing to counter behavioural biases. more »

Value Investing
5 Year Return: 30.3%
Dreman Low Price to Book Screen

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. more »

Value Investing
5 Year Return: 29.6%
David Dreman High Dividend Screen

David Dreman High Dividends is a contrarian high yield strategy championed by the renowned US fund manager and author David Dreman in his book Contrarian Investment Strategies. Dreman favoured buying out of favour value stocks with straightforward filters for quality. In this version of the screen we filter for higher yielding shares with strong financial positions, as many favourable operating and financial ratios as possible, with above average earnings growth. Dreman explains: "High yielding stocks provide you with the best protection in a bear market. These stocks give the dividend oriented investor more protection of principal on the downside and provide both rising dividend income as well as capital appreciation." Dreman's studies showed that the highest quintile of dividend paying stocks in the market outperformed those with low or no dividends by 4% annually, with half of the returns coming from the dividends themselves. He cautioned that "buying stocks with high dividend yields beats the market, but provides lower total returns than his other contrarian strategies". Dreman runs the firm Dreman Value Management and continues to research and write on contrarian and behavioural investing. more »

Value Investing
5 Year Return: 9.9%
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