Question: how to screen stocks?

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]

  1. They used a proprietary stock database. What would be a good alternative?

  2. Is “net-payout-yield” the same as dividend yield?

  3. What is a good metric for price momentum in the stock database?

  4. 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
  1. gtr1 has limited data to 1926, and most data fields to 1987.

  2. 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

  3. 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.

  4. 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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