Looking back through history, researchers have uncovered dozens of variables that have been associated with outsized equity returns.

And for the most part, these “stock market anomalies” can’t be explained by traditional risk- based models.

Here’s the gist:

Investors should favor low-beta, smaller-cap stocks that trade at low multiples of earnings, cash flow, and book value…as well as stocks that have begun to exhibit relative price strength, show positive earnings revisions, and significant insider buying.

On the other hand, investors should avoid stocks with high accounting accruals, declining institutional ownership, a wide dispersion of analyst estimates, and elevated short interest.

We, at Strategic Wealth Partners, have a software program that scores and ranks over 4,000 US stocks in real time based on these anomalies.

A simple back-tested trading strategy that was long the top 10% of stocks with a market cap of over $1 Billion based on the prior month’s rank would have beaten the S&P 500 by an average of 9.6% PER YEAR since the mid-1990s.

Stay tuned as we dive into more detail on some of these anomalies over the next few weeks.

Reach out today if you would like to learn more.


About the Author:

Mark Tepper, CFP

Mark Tepper is President and CEO of Strategic Wealth Partners. While he works with a variety of clients, Mark specializes in the wealth management and financial planning needs of entrepreneurs. Since entering the financial services arena in 2000, Mark has gone on to become a Million Dollar Round Table Top of the Table qualifier, placing him in the top 0.1% of financial advisors in the country. A well-known financial commentator, he appears regularly on CNBC’s Street Signs and Closing Bell, as well as FOX Business. Additionally, he is the author of Walk Away Wealthy - The Entrepreneur's Exit-Planning Playbook, and Exceptional Wealth. Beyond that, he has been featured in numerous publications, including The Wall Street Journal, Kiplinger’s, and CNN Money.

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