This week, it’s two-for-one in our stock screen section. Based on two stockpicking methods developed by the financial researcher-turned-investor Jim O’Shaughnessy in his classic book What Works on Wall Street, they’re a good example of how the way we define certain stock factors (and how these factors perform) can sometimes fall flat.
I say ‘fall flat’, but the good news is that both of our O’Shaughnessy screens – what the author terms the Cornerstone Value and Cornerstone Growth methodologies – managed to beat the market over the past 12 months.
Noting how value stocks tend to do well during bear markets, and growth stocks in bull markets, O’Shaughnessy makes a nuanced case for diversification. But he also argues that both can work simultaneously. When paired properly, he even argues that value and growth strategies offer a surer bet than simply following a market’s size-weighted neutrality.