Tag: quantitative value

What’s your GPA?

Gross Profitability to Total Assets (GPA) is the ratio of the firm’s gross profits (revenues minus cost of goods sold) to its assets. Gross profitability has been shown to have far more power than earnings in predicting returns. Gross profits is the cleanest accounting measure of true economic profitability. The farther down the income statement one goes, the more polluted profitability measures become, and the less related they are to true economic profitability. Investors who are interested in the literature can read The Other Side of Value: The Gross Profitability Premium by Robert Novy-Marx (pdf)

For the companies for which we have 5 years worth of financials available, 20 stocks with the best GPA score are:
RSSOFTWARE [stockquote]RSSOFTWARE[/stockquote]
GEOMETRIC [stockquote]GEOMETRIC[/stockquote]
COLPAL [stockquote]COLPAL[/stockquote]
ZENSARTECH [stockquote]ZENSARTECH[/stockquote]
TATAELXSI [stockquote]TATAELXSI[/stockquote]
NIITTECH [stockquote]NIITTECH[/stockquote]
THINKSOFT [stockquote]THINKSOFT[/stockquote]
INFINITE [stockquote]INFINITE[/stockquote]
ECLERX [stockquote]ECLERX[/stockquote]
ALLSEC [stockquote]ALLSEC[/stockquote]
HINDUNILVR [stockquote]HINDUNILVR[/stockquote]
BRITANNIA [stockquote]BRITANNIA[/stockquote]
INFOTECENT [stockquote]INFOTECENT[/stockquote]
ZYDUSWELL [stockquote]ZYDUSWELL[/stockquote]
PERSISTENT [stockquote]PERSISTENT[/stockquote]
TCS [stockquote]TCS[/stockquote]
TTKPRESTIG [stockquote]TTKPRESTIG[/stockquote]
MASTEK [stockquote]MASTEK[/stockquote]
TECHM [stockquote]TECHM[/stockquote]
PAGEIND [stockquote]PAGEIND[/stockquote]

The bottom 10 are:

SOUTHBANK [stockquote]SOUTHBANK[/stockquote]
CUB [stockquote]CUB[/stockquote]
DCB [stockquote]DCB[/stockquote]
ESL [stockquote]ESL[/stockquote]
SYNDIBANK [stockquote]SYNDIBANK[/stockquote]
YESBANK [stockquote]YESBANK[/stockquote]
UNIONBANK [stockquote]UNIONBANK[/stockquote]
VIJAYABANK [stockquote]VIJAYABANK[/stockquote]
UNITEDBNK [stockquote]UNITEDBNK[/stockquote]
UCOBANK [stockquote]UCOBANK[/stockquote]

The bottom 10 non-financial stocks:

ESL [stockquote]ESL[/stockquote]
IBPOW [stockquote]IBPOW[/stockquote]
SUNTECK [stockquote]SUNTECK[/stockquote]
RPOWER [stockquote]RPOWER[/stockquote]
SREINFRA [stockquote]SREINFRA[/stockquote]
GREENPOWER [stockquote]GREENPOWER[/stockquote]
UNITECH [stockquote]UNITECH[/stockquote]
MANJEERA [stockquote]MANJEERA[/stockquote]
GAMMNINFRA [stockquote]GAMMNINFRA[/stockquote]
MURLIIND [stockquote]MURLIIND[/stockquote]

GPA favors ‘asset light’ companies over infrastructure and capital intensive ones. For example, banks with a retail presence will obviously under-perform software services companies. But its a useful measure to discern between stocks within the same sector.

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Are You Feeling Lucky? The Magic Formula Edition

The markets have corrected a lot over the past couple of weeks. And some of you may be considering jumping in to “buy the dip.” If a plain vanilla index ETF like the Nifty Bees is not your cup of tea, then you should consider “Magic formula investing” – an investment technique outlined by Joel Greenblat in his book “The Little Book that Beats the Market.” This technique beat the S&P 500 96% of the time, and has averaged a 17-year annual return of 30.8%

The formula is based on a simple, combined ranking of Return on Capital (previous) and Earnings Yield (previous). You invest in 20–30 highest ranked companies, accumulating 2–3 positions per month over a 12-month period. Re-balance the portfolio once a year, selling losers one week before the year-mark and winners one week after the year mark. Rinse-repeat.

We went one step further and setup a Theme that invests in NSE stocks that fit this criteria. Check out the “Magic Formula Investing” theme – a portfolio of 10, equally weighted stocks for the value investor in you.

[stockquote]PRECOT[/stockquote]

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Are You Feeling Lucky? The Earnings Yield Edition

The markets have corrected a lot over the past couple of weeks. And some of you may be considering jumping in to “buy the dip.” If a plain vanilla index ETF like the Nifty Bees is not your cup of tea, consider these stocks, ranked based on historical Earnings Yield, as the next filter, after Return on Capital:

ARCHIES [stockquote]ARCHIES[/stockquote]
MAHSEAMLES [stockquote]MAHSEAMLES[/stockquote]
TATASPONGE [stockquote]TATASPONGE[/stockquote]
BHEL [stockquote]BHEL[/stockquote]
SASKEN [stockquote]SASKEN[/stockquote]

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Are You Feeling Lucky? The Return on Capital Edition

The markets have corrected a lot over the past couple of weeks. And some of you may be considering jumping in to “buy the dip.” If a plain vanilla index ETF like the Nifty Bees is not your cup of tea, consider these stocks, ranked based on historical Return on Capital (ROC), as the first filter:

COLPAL [stockquote]COLPAL[/stockquote]
ONGC [stockquote]ONGC[/stockquote]
ASIANPAINT [stockquote]ASIANPAINT[/stockquote]
ITC [stockquote]ITC[/stockquote]
ULTRACEMCO [stockquote]ULTRACEMCO[/stockquote]
TTKPRESTIG [stockquote]TTKPRESTIG[/stockquote]
SUNTV [stockquote]SUNTV[/stockquote]
PAGEIND [stockquote]PAGEIND[/stockquote]

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