O'Shaughnessy Cornerstone Growth | using Relative Strength

Stock Screening
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O’Shaughnessy was the first person granted access to Standard & Poor Compustat database which contains price histories of more than 10,000 stocks from 1950 onward. O’Shaughnessy sifted through this gold mine of data, testing the results of innumerable stock-picking strategies against more than 40 years of market ups and downs. We discuss his cornerstone growth stock-picking strategy, its interpretation and application in stock screens.

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I am currently reading the 4th edition of what works on wall street after reading the 3rd edition. I am not sure about what number to use for the “All stock” universe capitalization. In his 4th edition, he calls stocks greater than 200m USD market cap as “All stocks”. What would be a similar qualifying value for NSE or BSE stocks?

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I have been reading what works on wall street since January 2013 Though I understand everything he is trying to say, I get confused when trying to implement it in real time for stocks in NSE. I have been reading / working / trying to understand how to do it on NSE since last 3 months.

For example for shareholder yeild, I am not sure of any screener who calculates or reports stock yeild when company buys back its shares. All I am aware of is that they only report dividend yeild.

Any thoughts?

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Please O Please let there be somebody who has answers to my questions.

1st) The author had used compustat database for US stocks, are you aware of any readily available similar database for India?

2nd) Which stock exchange is better to implement the strategies NSE or BSE?

3rd) If there is no readily available database for INIDA (NSE or BSE) like compustat in US, and if I had to download each individual numbers like sales, earning, book value; should I be using quaterly numbers or annual numbers?

4th) If Annaul numbers are to be used, not all companied report their annual data simultaneously, some companies report their annual results in December and some companies in March. So If I am to rebalance the portfolio on January (thinking that the former set of companies have released their annual data in december; how would I go about the companies who release their annual data in March? (published on most internet websites by April end*)

5th) What if the data is not reliable like some internet websites have different numbers and other websites have different numbers, what should I do then?

  • I would have to get all my data from internet websites like rediff money, money control etc until there is a readily available database like compustat.

Thanks in advance for your time.

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Hello Akbar,

I too am a quant geek and i searching for the answers of the above. Here’s my take on some of the issues you are facing.

1). No - m not aware of any such database. You can use C-Line or ACE Equity to source the data.I would stick to a BSE 500 Universe as beyond that, the stocks will also have liquidity issues and will not be relevant for testing. Infact even in the BSE 500 Universe you will have to keep liquidity as a filter to ensure that you select stocks with reasonable liquidity. I think you will have to reconstruct the BSE 500 Universe to avoid survivorship bias.

2). I don’t think stock exchange criteria is relevant - instead liquidity criteria is much better. if the stock is liquid enough, it won’t matter much whether it is listed on BSE or NSE.

3). I would look for Annual Nos. for Financial Data, as one needs to know the actual date of release of Qtry nos. to make them useful. It is extremely cumbersome to find the actual date of declaration of Qtrly results and hence better avoided. All Annual Data to be considered with a 6 month lag.

4). Remember - Co’s have to get their accounts audited by 30th Sep and hence annual accounts would have been declared well before. Using 6 m lag would ensure that you avoid the timing issue. For companies having different dates of B/S - it is a challange, but not impossible. I have not done it myself, but I think if you add 6 months to the B/S Date, you would know the date on which you can use the B/S for testing purposes. This way - I f you rebalance in Jan (say Jan 2012) - Companies ending with Dec (say Dec 2011) will not be available as you would have added 6 months to it. In such cases you will have to use the prev B/S (in our case Dec 2010).

5). Can’t do anything about it. You need to trust the source for the same. ACE & C-Line both are reliable vendors - but they say ACE is better as it reports the things as in Annual Accounts - No manipulation of data.

Hope this answers some of the issues.

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Hello Ronak, Thanks so much for replying.

ACE :-

There are so many related companies with ACE on google.

http://www.aceanalyser.com/

http://www.accordfintech.com/product_equity.html

http://www.acesstocksaces.com/

I am still confused about point no. 4; Can I just download P/E, P/CF, P/S, P/BV, DY, EBITDA as shown on screener.in; rediff money, yahoo finance?

Can anybody please tell me why P/E is different onhttp://www.reuters.com/finance/stocks/financialHighlights?rpc=66&symbol=AXBK.NS

P/E Ratio (TTM) = 39.02

where as P/E Ratio onhttp://www.screener.in/company/?q=532215is

P/E = 10.28

on rediff money the value is somewhat close.http://money.rediff.com/companies/Axis-Bank-Ltd/14030047?src=srch

p/E = 10.76

on yahoo finance the value is similarhttp://in.finance.yahoo.com/q/ks?s=AXISBANK.BO

Trailing P/E (ttm, Intraday) = 9.91

The biggest whoper is reuters.com data vs (yahoo, rediff, screener) data? Can anybody explain me the huge difference?

I sent you a personal message, I am not sure if you got it or no. I wanted to understand clearly what you mean in point no. 4. Are you in mumbai? we could work together. My number is 9769499063.

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Hello Ronak,

Could you please give me the website link to ACE or C-line. There are just too many options when googling them

Thanks

Akbar Saya

1). data.I

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