Piotroski JSE Candidates

In the last two posts we introduced Piotroski, showed how well it worked in the US markets, back-tested it on the JSE and came to the conclusion that is is an extremely powerful selection criteria for picking a portfolio of undervalued stocks with Price-to-book ratios less than 1 that are likely to significantly outperform the market in any subsequent recovery.

PowerStocks are now proud to make history and publish the first ever Piotroski Longs/Shorts candidate ranking tables for the JSE. These are stocks with price:book ratios less than 1 and Piotroski scores of 7-9 (longs) or Piotroski scores of 2 and below (shorts). The Long Table appears below as at 31 October 2008. (click for larger view)



Note that every time a company releases a set of results, its Piotroski scores will change since all the information comes from the financial statements. Also these stocks by definition will be obscure. As Piotroski notes, low Price:Book stocks are generally neglected by the market in favour of more glamorous stocks, and during bear markets like the one we are currently in, this is even more so.

Piotroski scores can be used for picking shorting candidates as well. According to research and practical experience of some fund managers, F scores of 2 and below are good candidates for "distressed stocks" that are unlikely to hold up in depressions, recessions or tough economic times. Even if you don't do short trading, it is advised you avoid these stocks. The Piotroski Shorts table is below:

We showed that even for those shares with price:book ratios >1, Piotroski showed a very strong correlation between growth and "F" scores. If you would like a detailed Piotroski Ranking of all JSE stocks (475 of them) together with their PE's and Price:Book values as at 29 October 2008, sorted according to the ValueFinder scoring/ranking method then email us at powerstockz@gmail.com to place an order for the report, which will cost R250.

NEXT UP : Combining it all together - the ValueFinder