Sunday, February 08, 2015

Thinking About My Simple Formula

Simple Thoughts

I was thinking about my simple formula this morning.  It is (as readers will recall) to take from the official MFI list all stocks with market cap > $600m and dividend yields >2.4% ==> then randomly pick 5 stocks.  This has worked pretty well going back through all my tracking portfolios.  However, this does not consider inflation.

So as time goes on, it is a lower and lower bar to be in the stocks greater than $100m market cap and it is a lower and lower bar to be in the $600m+ range.  So I am going to introduce an inflation factor.  Once a year I will bump up the $100m and the $600m marks by the amount the stock market has gone up in that year.

I thought about back testing this as well,  I have started the work (I pulled in R3K and have present valued all market caps). But I can not fully do it, as I have kept my $100m threshhold for the pull since the beginning. So I can only present value market cap, not my criteria for the pull.

I do not think it is that critical, as I show over time (year by year) that my approach has worked. But this does show that even simple may not be that simple.

2 comments:

stocksbelowbv said...
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stocksbelowbv said...
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