Corequity has been screening its equity universe since 2004. The monthly results shown below cover 13 years, from September 2004-2017 The Undervalued Screen has achieved an average annualized gain over the S&P 500 of 5.20% while the Overvalued underperformed by 2.76% for a spread of 7.95% pa.
While this may not seem like much to some, it is enormous. This chart shows what the actual gains would have been on an investment of $100 over the period. The Undervalued Screens produce a return that is over 5.5 times that of the Overvalued.
The graph below shows the relative performance of the Screens compared to our universe of stocks.
(c) 2017 Robert L. Colby
 For background please refer to https://corequity.org/about-2-2/ . For explanation of methodology please refer to https://corequity.org/category/guide-to-the-corequity-analysis
 Undervalued Stocks are in the highest quartiles of Valuation Return and the ratio of Normalized Earnings (MPEPS) to Estimated Earnings (EPS). Ovevalued Screens’ criteria are the opposite.
 Our universe most closely tracks the equal weighted S&P 500
The performance of the screens have been particularly consistent since June 2016 as the graph below shows. The Undervalued have outperformed our Universe by 31% while the Overvalued underperformed by 19% for a spread of over 50% in 16 months.
Analysis of Short Term Results: Undervalued
The following tables on sectors and stocks show which were the largest contributors to these results. The tables show the sum of the Relative Strength (to the S&P 500).
Here we can see that the major contributors to the superior performance of the Undervalued Screen were Technology, Industrial and Consumer Cyclical.
The top and bottom Undervalued stocks which contributed the most (and least) are shown here:
Analysis of Short Term Results: Overvalued
The Sectors which contributed the most to the underperformance of the Overvalued were Energy, Financial and Basic Materials. The individual companies in the top and bottom 10 are as follows:
These attribution tables do not answer the question of why these results have been so consistent in the last 16 months.
A simple explanation would be value vs growth but this doesn’t hold up as the underlying principal of Corequity analysis is to put a price on growth specific to each company. This is further supported by the recent relative performance of the ETFs SPYG and SPYV, being the Spider ETFs for S&P 500 Growth and Value stocks.
This bears no resemblance to the UV/OV screen graph for the same period especially if the same scale is used.
(C) 2017 Robert L. Colby
The Undervalued and Overvalued Screened stocks by Sector are:
This table below shows the stocks entering and leaving the screens during the month of October together with their relative performance. The two leaving the screen outperformed the S&P by 5.6% while the newly screened UV stocks had declined by 13% relative.
(c) 2017 Robert L. Colby