Post #3201 by knighttof3 on the US Policy board

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An equally weighted portfolio of the 200 highest ROE firms in the S&P 1500, rebalanced quarterly, beat the S&P 500 by 4.0%/year in the last 30 years after trading costs, with vastly lower single-company risk.

You have pisted an enormous number of such back-tested screens. Do you have any data for, say, how the screens you posted 8 years ago (or any such longish period of time) have done since posting them?

Since there is no economic reason why high RoE firms should do better than low RoE firms (*) in these days of differing buyback policies, I would like to know why I should repose any faith that this screen will continue working.

(*) Meaning the low RoE firms are not reducing their equity - the denominator - as fast as the high ones, but their actual business and earnings and earnings growth (the numerator) could be better than the high RoE firms.

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