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