PREVIOUS : JSE Power of Value,Part-I
PREVIOUS : JSE Power of Value,Part-II
PREVIOUS : JSE Power of Value,Part-III
Let us examine some other interesting and important data about our research for 2000-2008 and how low price/book shares outperform the market.
First, the research shows better outperformance for smaller cap stocks less than R1Bn (roughly 65% of the smallest stocks on the JSE), especially for decile-10. This is shown below, and the graphs for 1,2 and 3 year growths are very similar to the one below.
Secondly, decile-10 consistantly and convincingly outperformed the ALSI group in each period of growth, for both large and small-cap universes. As shown below the small cap group outperformed the market 4.9x on average, over 1 year, whilst the All-cap group out-performed the market on average 2.7 times over five years.
Thirdly, standard deviation (volatility) for market out-performance among the 4 different sets of data shows a remarkably minute 0,25 for the 5 year growth period. As to be expected, volatility for overall market out-performance for shorter growth periods is much higher.
The most important observation from the above is that over four subsequent sets of 5 year growth periods, the lowest price/book decile (decile-10) with average maximum price/book ratio of 0,37 out-performed the ALSI by an average of 2.6 times with a tiny standard deviation of 0.25. This gives us high confidence that a strategy of constructing portfolios of 25-30 shares with the lowest price/book ratios not exceeding 0,37 should out-perform the general stock market indices by at least 2.35 times over a period of 5 years.
PREVIOUS : JSE Power of Value,Part-II
PREVIOUS : JSE Power of Value,Part-III
Let us examine some other interesting and important data about our research for 2000-2008 and how low price/book shares outperform the market.
First, the research shows better outperformance for smaller cap stocks less than R1Bn (roughly 65% of the smallest stocks on the JSE), especially for decile-10. This is shown below, and the graphs for 1,2 and 3 year growths are very similar to the one below.
Secondly, decile-10 consistantly and convincingly outperformed the ALSI group in each period of growth, for both large and small-cap universes. As shown below the small cap group outperformed the market 4.9x on average, over 1 year, whilst the All-cap group out-performed the market on average 2.7 times over five years.
Thirdly, standard deviation (volatility) for market out-performance among the 4 different sets of data shows a remarkably minute 0,25 for the 5 year growth period. As to be expected, volatility for overall market out-performance for shorter growth periods is much higher.
The most important observation from the above is that over four subsequent sets of 5 year growth periods, the lowest price/book decile (decile-10) with average maximum price/book ratio of 0,37 out-performed the ALSI by an average of 2.6 times with a tiny standard deviation of 0.25. This gives us high confidence that a strategy of constructing portfolios of 25-30 shares with the lowest price/book ratios not exceeding 0,37 should out-perform the general stock market indices by at least 2.35 times over a period of 5 years.
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