OT: Jim's ROE Large Cap Cash ROE Screener

Hi Jim,

Wanted to ask you about the MI screen that you had suggested in the recent past

Post number 283014

https://discussion.fool.com/retired-mechanical-investing-3508727…

I subscribed to value line and ran that screen. If possible, could you see if this looks right and similar to what you see now.

PIPR
SIG
KLIC
WIRE
AB
RL
EQH
TROW
LOGI
FL
NTAP
WFG
DKS
BBY
SEIC
EXPD
WSM
ROST
TER
AMP
CSCO
WWE
RHI
MKTX
TSM
TPR
GGG
AOS
ACN
INFY
TJX
MPWR
MSFT
IPG
NVDA
COST
NKE
WST
ODFL

Also, When we exclude those without dividends, we seem to miss some of the giants such as Alphabet. Would it make sense to include those without dividends?

Thanks a lot,
Charlie

I subscribed to value line and ran that screen. If possible, could you see if this looks right and similar to what you see now.

Sure, see below.
Unfortunately there are only about 10 tickers in common between your list and mine, so either one or both of us did it wrong.
(“both” is quite possible—I did it very quickly by hand so it’s quite possible I messed up)
The list will likely differ very slightly depending on when the screening is done, as they revise their data.
But not that much.

To recap my steps:
VL 1700-stock universe
Require any valid timeliness rank (1-5)
Require any positive number in the “Current Dividend” field
Of those remaining, keep 32% highest sorted on “Return on Shareholders’ Equity” (this is the figure updated annually, not quarterly)
Of those remaining, keep [cash - long term debt] top 40 (gives a very strong large cap bias)
Of those remaining, final sort within those 40 by [cash - long term debt] / market cap

Your stocks all have a Timeliness rank, and all have a Current Dividend.
They all have hefty reported “Return on Shareholders’ Equity”, above the cutoff that the 32% represents.
But it looks like it goes pear shaped at the step to sort on [cash-debt].

When we exclude those without dividends, we seem to miss some of the giants such as Alphabet. Would it make sense to include those without dividends?

It’s partly a matter of taste–some people like dividends : )
But also, a bit to my surprise, the statistics in the backtest of this specific screen suggested that the returns were just a hair better and steadier if requiring a dividend.
Sure, it eliminates some great companies, but this is a shotgun approach, not a rifle approach.
If the shotgun hits the broad target, you’ve succeeded. It doesn’t matter if it hits any given spot.

Jim

The list that I got:
SYF
ORCL
CSCO
INTC
EQH
RIO
TEF
TSM
PFE
HON
PBR
MSFT
IBM
NVDA
TXN
NSRGY
COST
KO
UNH
ABBV
V
AVGO
PG
AAPL
GILD
CAT
MRK
DE
PEP
NKE
ABT
MMM
DFS
VALE
JNJ
ACN
AMP
ROST
OMC
FCX

6 Likes

I subscribed to value line and ran that screen…

FWIW, it has had a nasty start to 2022. Down -26% in the seven months December-June versus -16% for the S&P. Ouch, but it happens.
So be glad you didn’t start a few months ago.

Despite that it’s still beating the S&P by 2%/year since the May 2020 post that suggested it, though.
To recap:
“The goal is a screen which is as safe as the S&P 500 but with the hope of somewhat higher returns over the long run.”

Jim

2 Likes

Thanks a lot Jim! Will try it again, and see if I can replicate what you got.

Unfortunately there are only about 10 tickers in common between your list and mine, so either one or both of us did it wrong.

Jim, if I recall correctly, you mentioned at some point that you subscribe to Value Line Analyzer? Maybe I am remembering wrong. In any case, I subscribe to Value Line Investment Survey and use Classic Stock Screener. I am guessing Charlie does as well. I may be making the same mistake as Charlie or there may be a difference between the two.

For example, while not an exact match, my results more closely match Charlie’s. None of my top 40 had negative (Cash - Long-Term Debt). However, on a spot check of your list, VL tells me:

SYF:…Cash = 8337…Long-Term Debt = 14507…so Cash-LTD = -6170
ORCL:…Cash = 46554…Long-Term Debt = 75995…so Cash-LTD = -29441

(sorry, I forgot how to post a table. I added “.” for spacing.)

Others on your list have negative Cash-LTD as well. When sorting the 1397 stocks with Timeliness by Cash-LTD, AAPL ranks #1375.

Charlie, do you see similar numbers for Cash & LTD or did you get your results to match Jim’s?

Chip

Hi Chip,

Yes, I used the classic stock screener, and getting similar results as you for cash & LTD.

Charlie

1 Like

For example, while not an exact match, my results more closely match Charlie’s.

Sorry-- Hey, I said I did it quickly : )

I have a program that does it all automatically and consistently, but I didn’t use that.
Here’s another attempt, again by hand. At least I did it a bit more carefully.

It matches quite well, only a few differences among the top 40.
Specifically, my ranks 1-34 are in your list, but my ranks 35-40 aren’t.
Of the ones on both lists, the sort order is the same.
This is a level of difference that could be from using a different week’s data.

There were 925 stocks which had both a Timeliness ranking and a positive “Current Dividend” field.
So, of those, I kept 32% = 296 of them with the highest “Return on Shareholder’ Equity”
That gave lowest ROE to keep = 23.21. All your picks are at least that high, so no obvious problem there.
It looks like your list, the last 6 stocks have a [cash-debt] figure lower than the cutoff that I had among the top 40, of $441m.
So, it seems (?) like your run eliminated some stocks before the sort that my run didn’t.
Specifically SPGI TXN INTU LRCX JNJ NVO
In my data they all have a Timeliness rank, a positive current dividend, reported ROE over 26%, and [cash-debt] over $691m.

Jim

My list of top 40 in order (still done quickly by hand, still not guaranteed!)

PIPR
SIG
KLIC
AB
RL
EQH
TROW
LOGI
NTAP
WFG
DKS
BBY
SEIC
EXPD
WSM
ROST
TER
AMP
CSCO
RHI
MKTX
TSM
GGG
AOS
ACN
INFY
TJX
MPWR
MSFT
NVDA
COST
NKE
WST
ODFL
SPGI
TXN
INTU
LRCX
JNJ
NVO

7 Likes

Thanks, Jim. My results match yours. I appreciate the verification.

Thanks so much Jim