Buying quality companies at historical low valuations has been proved to be a long term winning value strategy. This is confirmed again this year. GuruFocus model portfolio of historical low price/sales (P/S) gained 6.42% year-to-date, as the broad market goes no where.
Its sister model portfolio of historical low price/book (P/B) gained 4.18% year-to-date. Both of them are constructed on Jan. 2, each has the 25 stocks that have the lowest P/S (or P/B) relative to their historical values. None of the portfolios had turnovers since incepted. Please check out the current list historical low P/S and P/B companies.
When creating the portfolio of historical low P/S and P/B portfolios, GuruFocus requires that not only the companies are sold at historical low price-to-sales or price-to-book ratios, but also have the most consistent and very predictable business performances. Since these companies have been quite consistent with their business operations, when they are at historical low valuations as measured by price/sales ratio or price/book ratio, we expect that over long term, their valuations will reverse to the historical mean. They will provide good defense in a down market, and have good up side potential in a up market.
Requiring that the companies have consistent revenue and earning growth reduces the risk of owning the seemingly cheap stocks that get even cheaper. Since a cheap stock can always become even cheaper if the underlying business deteriorates.
Historical Low P/S Portfolio, up 6.42%, outperforms S&P500 by 7.41%
Since the inception on Jan. 2, 2010, the historical low P/S portfolio has gained 6.42%, outperforming the S&P500 by 7.63%. The index itself declined 1.21%. All numbers do not include dividends.
Among the 25 stocks in this portfolio, Lakeland Bancorp Inc. (LBAI), Family Dollar Stores Inc. (FDO, Financial) and AutoZone Inc. (AZO, Financial) are among the best performing stocks in this portfolio, up 40.38%, 48.58% and 33.65%, respectively.
Historical Low P/B Portfolio, up 4.18%, outperforms S&P500 by 5.39%.
The historical low P/B portfolio outperformed the market by 4.18% year to date. This portfolio has a lot of overlap with the historical low P/S portfolio. This is not surprising since we are looking for stocks only in companies with high predictability rank.
The above charts of the historical low P/S and P/B portfolios show that they do not decline as much in the market down days, and they appreciate more than the S&P in the up days. That is the reason they outperformed S&P.
Check out the current list historical low P/S and P/B companies. These screens are created for our GuruFocus users to find good companies that are cheap relative to long term historical valuation. If you have followed these portfolios, you have better chances to outperform the market.
The holdings in the model portfolios and the screens are just a few of the many premium features we provided for GuruFocus Premium Members. If you are not a Premium Member, we invite you for a 7-day Free Trial.
Its sister model portfolio of historical low price/book (P/B) gained 4.18% year-to-date. Both of them are constructed on Jan. 2, each has the 25 stocks that have the lowest P/S (or P/B) relative to their historical values. None of the portfolios had turnovers since incepted. Please check out the current list historical low P/S and P/B companies.
When creating the portfolio of historical low P/S and P/B portfolios, GuruFocus requires that not only the companies are sold at historical low price-to-sales or price-to-book ratios, but also have the most consistent and very predictable business performances. Since these companies have been quite consistent with their business operations, when they are at historical low valuations as measured by price/sales ratio or price/book ratio, we expect that over long term, their valuations will reverse to the historical mean. They will provide good defense in a down market, and have good up side potential in a up market.
Requiring that the companies have consistent revenue and earning growth reduces the risk of owning the seemingly cheap stocks that get even cheaper. Since a cheap stock can always become even cheaper if the underlying business deteriorates.
Historical Low P/S Portfolio, up 6.42%, outperforms S&P500 by 7.41%
Since the inception on Jan. 2, 2010, the historical low P/S portfolio has gained 6.42%, outperforming the S&P500 by 7.63%. The index itself declined 1.21%. All numbers do not include dividends.
Among the 25 stocks in this portfolio, Lakeland Bancorp Inc. (LBAI), Family Dollar Stores Inc. (FDO, Financial) and AutoZone Inc. (AZO, Financial) are among the best performing stocks in this portfolio, up 40.38%, 48.58% and 33.65%, respectively.
Historical Low P/B Portfolio, up 4.18%, outperforms S&P500 by 5.39%.
The historical low P/B portfolio outperformed the market by 4.18% year to date. This portfolio has a lot of overlap with the historical low P/S portfolio. This is not surprising since we are looking for stocks only in companies with high predictability rank.
The above charts of the historical low P/S and P/B portfolios show that they do not decline as much in the market down days, and they appreciate more than the S&P in the up days. That is the reason they outperformed S&P.
Check out the current list historical low P/S and P/B companies. These screens are created for our GuruFocus users to find good companies that are cheap relative to long term historical valuation. If you have followed these portfolios, you have better chances to outperform the market.
The holdings in the model portfolios and the screens are just a few of the many premium features we provided for GuruFocus Premium Members. If you are not a Premium Member, we invite you for a 7-day Free Trial.
