What Works on Wall Street Third Edition

After reading What Works on Wall Street, investors will know that:

  • Most small-capitalization strategies owe their superior returns to micro-cap stocks having market capitalizations below $25 million. These stocks are too small for virtually any investor to buy.
  • Buying low PE ratio stocks is most profitable when you stick to larger, better-known issues.
  • The price-to-sales ratio is the most consistent value ratio to use for buying market-beating stocks.
  • Last year’s biggest losers are among the worst stocks you can buy.
  • Last year’s earnings gains alone are worthless when determining if a stock is a good investment.
  • Using several factors dramatically improves long-term performance.
  • You can do ten times as well as the S&P 500 by concentrating on large, well-known stocks with high shareholder yield.
  • Relative strength is the only growth variable that consistently beats the market, but it must always be matched with other factors to mitigate its high levels of risk.