It's an interesting list, but I wouldn't use it to pick stocks. The cheapest (lowest P/E) stocks in the S&P are not generally outperformers, if that's the only criterion used.

The advantage is more at the other extreme: if you merely avoid the most expensive ones based on terrible earnings yields (highest P/E), things are improved.

e.g., using a close proxy of the S&P 500 (500 largest market cap US-domiciled firms), millennium to end 2013, reconstituted quarterly without friction:
Most expensive 20% by current P/E, equally weighted: CAGR 3.16, probably best to avoid those unless you have a good reason.
The other 80% of them: CAGR 9.34, a better hunting ground.

The S&P 500 total return same period: CAGR 7.05, between the two.


If you're going to use only one criterion, there are probably better ones than P/E.
e.g., Russell 1000 proxy universe, top N by five year sales growth rate.
Same period as above, 20 stocks quarterly WITH friction, CAGR 14.4

Jim