I think that this question is on-topic for the Mechanical Investing Board.
https://www.robeco.com/en/insights/2022/05/conservative-inve…
**Conservative investing stands the test of time**
**by Guido Baltusson, 23-05-2022 | Insight**
**Conservative investing (also termed defensive or low-risk investing) is all about winning by losing less. Using a novel database that goes as far back as the 19th century, we see that this concept holds firm across many risk-off periods triggered by various events.**
**...**
**In our recent study, we examined the performance of a simple rules-based conservative strategy over a period of more than 150 years (January 1866 to December 2021), using a novel US stock database created by Robeco researchers....**
**For our investigation, we created low-risk or defensive strategies using an approach we term the ‘Conservative Formula’. This is based on a few rules:**
**From the largest 1,000 stocks, we select 500 with lowest volatility.**
**From this subset, we then choose 100 stocks with the best net-payout-yield**
**and price momentum.**
**The resulting portfolio is then rebalanced on a quarterly basis.**
**By including net-payout-yield and price momentum, we create a more balanced defensive strategy that benefits from multiple alpha sources and avoids some of the pitfalls of [an alternative strategy they studied) low volatility investing, such as high valuations and weak momentum. This is also serves as a rough proxy for our Conservative Equities strategy...** [end quote]
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They used a proprietary stock database. What would be a good alternative?
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Is “net-payout-yield” the same as dividend yield?
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What is a good metric for price momentum in the stock database?
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What is your opinion of this?
Thanks,
Wendy
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1.) The best alternative, although it’s a flat learning curve, is GTR1 - mainly because Robbie eliminated survivorship bias so far back in time. StockInvestorPro (online) is probably the second best, although the data is not perfect - pretty good, probably good enough.
2.) “Net-payout-yield” may be something similar to Cambria Funds’ (Meb Faber) Shareholder yield, which is a combination of buybacks and dividend yield. That’s just a guess, of course.
3.) Price momentum is whatever time periods and weights Robeco chose to use. There are some common ones, like:
: average (weighted) of 6, 12, 3year and 5 year price change
: shorter term, same wt avg using 1,3,6 and 12
: 6 month, 12 month, 3 year
: 12 month price change 1 month ago
ETC. You get the picture. They can tweak the weights, the lookbacks, the lags to get anything they want.
4.) This is fine, but #1 they probably didn’t share every “factor”. #2, there are many common “screeners” online (Zacks, Fidelity, others) that have pre-defined “conservative growth” or “safe growth” predefined screens that will present the investor with a list of current candidate stocks. They’re not “backtestable” using public backtesters, although PortfolioVisualizer is probably the best one but not for individual stocks and only goes back some number of years less than since the dawn of time.
Many companies have the data to construct these types of screens to datamine however they want, and draw investor $$$.
7 Likes
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gtr1 has limited data to 1926, and most data fields to 1987.
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dividend yield is Cash Dividends / Market Cap
net-payout-yield is (Cash Dividends + net stock repurchases) / Market Cap
shareholder yield is (Cash Dividends + net stock repurchases + debt paydown) / Market Cap
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Value traps can stay cheap for years. Some recent price momentum might help filter out value traps. 26-week price change is a starting point.
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Cambria Shareholder Yield ETF (SYLD) has had good results, but free cash flow might be a more direct measure of shareholder value creation. I don’t have any good screens using Shareholder Yield, but have many using free cash flow.
— links ----
Subject: GTR1 Total Shareholder Yield, Date: 9/7/2018
“The investment strategy “High Returns from Low Risk” proposed by Pim Van Vliet (a portfolio manager at Robeco, based in the Netherlands) for example is based on the “income yield” which is the sum of dividend yield and yield from share buybacks. He published a book in early 2017 which describes the strategy in more detail.”
https://discussion.fool.com/gtr1-total-shareholder-yield-3400089…
The Case for Shareholder Yield, December 28, 2005
“shareholder yield (cash dividends, stock repurchases and debt reduction)”
https://www.eipny.com/assets/pdfs/CaseforShareholderYield122…
“Focusing strictly on dividend payments, however, misses two key indicators of strong free cash flow: net share repurchases and net debt paydown. The manager believes that a focus on all three factors - dividend payments, net share repurchases and net debt paydown, a trio collectively known as shareholder yield - produces a portfolio of companies that offer strong free cash flow characteristics”
https://www.cambriafunds.com/assets/docs/SYLD-FactSheet.pdf
Cambria Shareholder Yield ETF, September 30, 2013
Cambria’s Process of Filtering Stocks for SYLD ETF
“As a measure to avoid value traps, Cambria does a final sort based on momentum and trend indicators”
http://web.archive.org/web/20131101215822/http://www.cambria…
8 Likes
I changed the screens in post 283576 to Market Cap top 1000. This reduced CAGR by about 4, while not changing the risk metrics much.
Screen CAGR SAWR GSD LDDD3 MDD UI Sharpe Beta TI AT
PimVanVlietNetPayoutYield 16.5 8.9 19 9.0 -50 9.4 0.82 0.9 16 3
PimVanVlietShareholderYield_ignoreCash 16.6 8.2 19 9.6 -55 10.9 0.82 0.9 16 3
PimVanVlietShareholderYield 16.0 7.3 20 9.8 -55 11.9 0.78 0.9 16 3
PimVanVlietNetPayoutYield_LC 13.2 8.9 17 9.0 -48 9.3 0.71 0.8 14 2
PimVanVlietShareholderYield_ignoreCash_LC 12.7 8.2 17 9.6 -51 10.3 0.68 0.8 13 3
PimVanVlietShareholderYield_LC 12.0 6.9 18 10.0 -54 11.9 0.63 0.8 12 3
from 19870302 to 20220607, 0.4% friction, 63 day hold, 20 deep.
[PimVanVlietNetPayoutYield_LC} results are close to the OP article (Figure 2 Conservative Formula results by decade):
14% CAGR 1990s
8% CAGR 2000s
15% CAGR 2010s
Screen CAGR SAWR GSD LDDD3 MDD UI Sharpe Beta TI AT From To
PimVanVlietNetPayoutYield_LC 16 11 13 6 -19 4.9 0.84 0.7 14 2 19891229 19991231
PimVanVlietNetPayoutYield_LC 11 8 17 13 -48 12.5 0.59 0.7 14 2 19991231 20091231
PimVanVlietNetPayoutYield_LC 14 11 13 4 -21 3.9 1.07 0.9 15 2 20091231 20191231
PimVanVlietNetPayoutYield 22 17 16 5 -25 4.9 1.11 0.9 19 2 19891229 19991231
PimVanVlietNetPayoutYield 16 10 20 13 -50 13.0 0.76 0.7 19 3 19991231 20091231
PimVanVlietNetPayoutYield 14 11 14 4 -22 4.2 1.03 0.9 15 3 20091231 20191231
http://gtr1.net/2013/?~PimVanVlietNetPayoutYield_LC:h63f0.4:…
http://gtr1.net/2013/?~PimVanVlietShareholderYield_LC:h63f0…
http://gtr1.net/2013/?~PimVanVlietShareholderYield_ignoreCas…
1 Like
These are the current picks for {PimVanVlietNetPayoutYield}
Ticker Yield BuybackYield NetPayoutYield styp.a SharesQ1 SharesQ5 MktCap Mo rankMo rankYield Factor CompanyName DebtYield FCFP TotalYield-FCFP
HPQ 2.5% 15.9% 18.4% 11 1081.0 1285.0 41,460 26 907 946 1853 Hp Inc -4% 12% 3%
MUSA 0.5% 9.1% 9.6% 11 24.7 27.1 5,955 72 952 900 1852 Murphy Usa Inc 1% 8% 2%
ELP 16.4% 0.0% 16.4% 31 2736.6 2736.6 1,847 23 895 943 1838 Companhia Paranaense De Energia -1% 0% 16%
AZO 0.0% 9.4% 9.4% 11 20.5 22.6 42,079 41 938 894 1832 Autozone Inc -2% 6% 1%
VST 2.6% 6.8% 9.4% 11 451.6 484.7 11,828 36 931 893 1824 Vistra Corp 9% 4% 15%
MCK 0.6% 7.3% 7.9% 11 147.2 158.8 46,757 72 953 870 1823 Mckesson Corp -3% 7% -2%
NUE 1.5% 8.9% 10.4% 11 271.6 298.1 35,594 23 893 913 1806 Nucor Corp 0% 16% -6%
MATX 1.3% 5.8% 7.0% 11 40.9 43.4 3,833 41 939 848 1787 Matson Inc 12% 16% 3%
BOX 0.0% 10.5% 10.5% 11 144.7 161.7 3,871 18 852 915 1767 Box Inc Cl A -1% 6% 3%
CB 1.6% 5.5% 7.0% 12 425.8 450.5 90,513 25 901 852 1753 Chubb Ltd -1% 11% -5%
MO 6.7% 2.1% 8.8% 11 1818.0 1857.0 97,788 19 867 884 1751 Altria Group Inc 1% 2% 8%
COKE 0.2% 21.5% 21.7% 11 **7.4** 9.4 5,314 12 797 949 1746 Coca Cola Consolidated Inc 7% 6% 23%
SCI 1.4% 5.1% 6.5% 11 161.3 169.9 11,373 31 923 819 1742 Service Corp International -3% 4% 0%
NTR 2.8% 3.0% 5.8% 12 552.6 569.7 49,460 46 944 784 1728 Nutrien Ltd -3% 2% 1%
BMY 2.8% 4.0% 6.8% 11 2146.0 2236.0 163,065 20 881 840 1721 Bristol Myers Squibb Company 2% 6% 3%
TRTN 3.9% 3.1% 7.0% 12 64.9 66.9 4,248 20 874 846 1720 Triton International Ltd -46% -46% 7%
HUN 2.3% 3.5% 5.8% 11 212.7 220.4 7,590 26 909 790 1699 Huntsman Corp 2% 7% 1%
KR 1.6% 3.4% 5.0% 11 735.0 761.0 37,588 45 943 744 1687 Kroger Company The 0% 8% -2%
NOC 1.4% 4.4% 5.8% 11 156.0 163.1 76,488 23 897 785 1682 Northrop Grumman Corp -2% 1% 3%
DGX 1.9% 10.5% 12.4% 11 119.0 133.0 16,169 9 750 929 1679 Quest Diagnostics Inc -3% 8% 2%
CI 1.7% 8.7% 10.4% 11 318.5 348.6 83,211 10 764 911 1675 Cigna Corp -4% 6% 0%
ACGL 0.0% 6.6% 6.6% 12 374.2 400.8 17,813 16 841 831 1672 Arch Capital Group Ltd 1% 17% -9%
LHX 1.8% 6.5% 8.3% 11 193.2 206.7 47,522 11 788 877 1665 L3harris Technologies Inc -1% 2% 5%
E 6.1% 0.9% 7.0% 31 1769.9 1786.3 56,410 13 812 850 1662 Eni S P A 4% 23% -12%
AIZ 1.5% 5.8% 7.2% 11 55.8 59.2 10,037 13 805 857 1662 Assurant Inc -4% 3% 1%
L 0.4% 7.3% 7.6% 11 248.0 267.4 15,960 12 795 862 1657 Loews Corp 0% 14% -6%
LMT 2.5% 3.8% 6.3% 11 268.3 279.0 121,425 16 843 810 1653 Lockheed Martin Corp 0% 4% 2%
EPD 6.5% 0.2% 6.8% 71 2178.0 2183.4 62,078 13 814 836 1650 Enterprise Products Partners L P -1% 4% 1%
AMX 2.0% 3.5% 5.5% 31 3210.8 3327.1 23,288 20 872 771 1643 America Movil S A B De C V Adr 8% 4% 9%
BTI 8.0% -0.1% 7.8% 31 2287.0 2284.0 11,464 10 768 869 1637 British American Tobacco 8% 5% 10%
PFG 3.5% 4.9% 8.5% 11 259.4 272.9 18,244 9 753 880 1633 Principal Financial Group Inc 3% 12% 0%
TRV 2.1% 4.4% 6.5% 11 240.9 252.1 42,867 13 808 824 1632 The Travelers Companies Inc -2% 15% -10%
ORLY 0.0% 5.4% 5.4% 11 66.6 70.4 41,725 16 836 770 1606 O Reilly Automotive Inc 0% 6% -1%
PTR 6.4% -1.3% 5.1% 31 1860.0 1835.8 437 18 854 752 1606 Petrochina Company Ltd 18% 17% 6%
AAP 3.2% 6.7% 10.0% 11 61.3 65.7 11,416 5 699 906 1605 Advance Auto Parts Inc -8% 1% 1%
GD 2.1% 2.5% 4.6% 11 277.1 284.1 65,422 22 890 715 1605 General Dynamics Corp 4% 6% 3%
AON 0.8% 5.2% 6.0% 12 215.3 227.1 57,475 13 806 798 1604 Aon Plc Cl A -3% 2% 0%
LOW 2.1% 8.1% 10.2% 11 660.0 718.0 125,046 4 688 910 1598 Lowe S Companies Inc -7% 4% 0%
ENB 5.5% -0.2% 5.4% 12 2026.0 2022.0 96,314 15 830 765 1595 Enbridge Inc -7% -3% 1%
ASH 1.2% 8.2% 9.4% 11 56.0 61.0 6,027 5 703 892 1595 Ashland Global Holdings Inc 15% 3% 22%
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