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So a random neuron firing reminded me of the BMW method for stock picking. Which I hadn't thought of in years. And to my surprise, the website is still there and the links to the stock charts still work.

Has there been a definitive post discovery test that says whether the method works well or not? I remember the big criticism being that there was no fundamental reason why price growth CAGR should return to the average value.


(Now, if a neurologist could explain why I occasionally remember details of motels I stayed at years ago, I would be most appreciative.)

Strikes me as one of those things that work until it doesn't and then it can fail spectacularly. It never made sense to me.
Of course you could say the same thing about value stocks. You believe they are trading under their value but then some stocks' values just continue to decline.

Wow. That goes back....25 years? I remember some guy, was it Mark Klein did a lot of work with charts and stuff although he wasn't the one that came up with it. Hope I got that right.

I couldn't find any posted backtests of the BMW method. Requiring 20 years of stock price history limits many backtesting tools. There were a few posts discussing screens that picked BMW-type stocks (e.g. Benchmark Investing). The French Fama Factor LT-Rev has a 5 year lookback, but has negative CAGR after inflation.

https://www.portfoliovisualizer.com/factor-statist...

=== links ===

Long-Term Reversal Factor (LT Rev)
We use six value-weight portfolios formed on size and prior (13-60) returns to construct LT_Rev.
https://mba.tuck.dartmouth.edu/pages/faculty/ken.f...

"It is based on reviewing the exponential growth of a company's stock price from some point in the past (usually 20 – 30 years) and comparing today's price to ranges of growth rates (CAGR) that have defined that company. A stock that is at or below its lowest historical CAGR rate is considered a good buy."
https://web.archive.org/web/20100827103705/http://...

https://yorickm.com/Message.php?pid=25145547
https://yorickm.com/Message.php?pid=23043947
https://yorickm.com/Message.php?pid=21058166

https://gtr1.net/2013/?~BenchmarkInvesting_2004072...

I guess one hiddenish benefit of the method is that by requiring a long history of price action, it weeds out a bunch of companies that either never become profitable or are flash in the pans and die when the fad they are riding dies. Just staying out of Beanie Baby retail shops can keep you out of a certain amount of trouble.

I don't recall the details of the BMW method, but Jim said the charts suffered from crystal ball effect.

https://yorickm.com/Message.php?pid=35119765

For those interested or curious here are a few sites discussing the "method".

https://bmwmethod.com/

https://invest.kleinnet.com/

https://discussion.fool.com/c/investment-analysis-...

Most haven't been updated in quite some time although the fool board is only a year or two old.


Rich

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