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Historical Low P/S and P/B Model Portfolios Outperform S&P 500 Handsomely

May 12, 2010 | About:

GuruFocus monitors the performances of historical low P/S and P/B stocks with two model portfolios, one for historical low P/S stocks, and the other for historical P/B stocks.

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 consistent and very predictable business performances. Since these companies have been quite consistent with their business operation, 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 up market.

Historical Low P/S Portfolio, up 12.48%, outperforms S&P500 by 7.41%

Since the inception on Jan. 2, 2010, the historical low P/S portfolio has gained 12.48%, outperforming the S&P500 by 7.41%. The index itself increased 5.07%. The outperformance is remarkable in such as short time period.


Among the 25 stocks in this portfolio, Lakeland Bancorp Inc. (LBAI) and Family Dollar Stores Inc. (FDO) are among the best performing stocks in this portfolio, up 69.17% and 43.66%, respectively. The worst performing stocks are Baxter International Inc. (BAX) and Verizon Communications Inc. (VZ), down 23.52% and 13.18%, respectively.

Historical Low P/B Portfolio, up 11.45%, outperforms S&P500 by 6.38%.

The historical low P/B portfolio outperformed the market by 6.38% 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.

The historical low P/S and P/B screens are for our GuruFocus users to find good companies on the cheap. 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.

Rating: 2.3/5 (4 votes)


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Performances of the stocks mentioned by

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