Joseph Piotroski, a Stanford accounting professor, developed a set of rules to find companies with strong Liquid Balance Sheets, Profitability, and Operating Efficiency. Professor Piotroski proposed screening for stocks based on a checklist that awards one point for each matched criterion. To learn more about the criteria, view Stock Screen: Piotroski F-Score.
In his famous paper, Professor Piotroski explained that an "investment strategy that buys expected winners and shorts expected losers generates a 23% annual return between 1976 and 1996." I used the finbox.io stock screener to find stocks included in the Russell 1000 index that scored perfectly on Piotroski’s test. There were only 10 companies (or 1%) that passed all nine checks.
10 Stocks that Aced Piotroski’s Test
<img src='http://res.cloudinary.com/finbox/image/upload/v1470065516/Piotroski_Passed_List_pjfbl0.jpg' alt= ‘Perfect Piotroski Score Screen Results’>
View the latest screen results here.
Summary stats of the screen results.
<img src='http://res.cloudinary.com/finbox/image/upload/v1470067412/Winners_Summary_Stats_iczrtu.jpg' alt= ‘Perfect Piotroski Score Screen Summary Results’>
Note that the one-year return for this ten company index (7.3%) slightly beat the S&P 500 over the same period.
6 Stocks that Failed Piotroski’s Test
Using the same screen mentioned above, there were 6 companies that passed fewer than 2 checks.
<img src='http://res.cloudinary.com/finbox/image/upload/v1470065516/Piotroski_Failed_Listed_dnastk.jpg' alt= ‘Failed Piotroski Test Screen Results’>
View the latest screen results here.
Summary stats of the screen results.
<img src='http://res.cloudinary.com/finbox/image/upload/v1470067414/Losers_Summary_Stats_n2e8ce.jpg' alt= ‘Perfect Piotroski Score Screen Summary Results’>
Note that the one-year return for this six company index (-27.7%) is significantly below that of the S&P 500 over the same period.
Piotroski's investment strategy would argue to buy:
- Altria (MO)
- Ansys (ANSS)
- Carnival (CCL)
- Citrix Systems (CTXS)
- Erie Indemnity (ERIE)
- Foot Locker (FL)
- HCA (HCA)
- Piedmont Office Realty Trust (PDM)
- RPM International (RPM)
- Sherwin Williams (SHW)
And short:
- SunPower (SPWR)
- BioMarin Pharmaceutical (BMRN)
- Golar LNG (GLNG)
- New York Community (NYCB)
- Pandora Media (P)
- Under Armour (UA)
The one-year returns of the stocks above appear to support Piotroski's research. The F-Score is a strategy many investors should consider taking a closer look at.
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This article was written by Matt Hogan.
