Book Strategies

Strategies from influential investment books — translated into backtestable rules with specific thresholds.

Joel Greenblatt — Magic Formula

Rank stocks by quality (return on capital) and cheapness (earnings yield). Buy the top-ranked combination. Hold 1 year, rebalance. Exclude financials and utilities.

Buy INTC and CSCO when earnings yield > 8% and return on capital > 20%, sell when earnings yield drops below 4%

Joseph Piotroski — F-Score

Among cheap stocks (low P/B), use 9 binary signals to separate improving companies from deteriorating ones. Buy when F-Score ≥ 8 AND P/B < 1.5.

Buy INTC when P/B < 1.5 and ROA > 0 and operating cash flow > net income and gross margin is improving

Dogs of the Dow

Buy the 10 highest-yielding Dow Jones stocks annually. High yield often indicates temporary undervaluation. Rebalance each January.

Backtest an equal-weight portfolio of the 2024 Dogs of the Dow — WBA, VZ, MMM, DOW, IBM, CVX, AMGN, CSCO, KO, JNJ — rebalanced annually over the last 5 years

Momentum / Trend Following

Buy assets with the strongest recent returns. Stay invested when above long-term trend, exit when below.

Buy SPY when 50-day SMA crosses above 200-day SMA, sell when it crosses below

Mean Reversion (Short-term)

Buy when price is stretched too far below average — it tends to snap back.

Buy QQQ when RSI(14) < 30 and price is within 5% of the lower Bollinger Band, sell when RSI > 70

Tobias Carlisle — Acquirer's Multiple

Buy the cheapest stocks by enterprise value to operating earnings. Pure cheapness outperforms quality+cheapness.

Buy T and VZ when EV/EBITDA < 6, sell when EV/EBITDA rises above 10

Mark Minervini — Trend Template (SEPA)

Only buy stocks in confirmed Stage 2 uptrends that meet ALL of these technical criteria:

Buy NVDA when price is above the 50, 150, and 200-day SMA and within 25% of 52-week high and 25% above 52-week low

Stan Weinstein — Stage Analysis

Stocks move through 4 stages. Only buy in Stage 2 (advancing), sell in Stage 3 (topping).

Buy AAPL when price closes above the 150-day SMA after closing below it the previous day, on volume 1.5x above average. Sell when it closes back below the 150-day SMA.

Dividend Aristocrats

Companies that have raised dividends for 25+ consecutive years have proven business models.

Buy KO and JNJ when dividend yield > 2% and payout ratio < 75% and debt-to-equity < 1 and free cash flow is positive

Shareholder Yield Strategy

Total cash returned to shareholders (dividends + buybacks + debt paydown) is a better predictor than dividend yield alone.

Buy MO and VZ when shareholder yield > 8% and P/E < 20 and dividend yield > 0%

Dual Momentum — Gary Antonacci

Combine relative momentum (which asset is strongest) with absolute momentum (is it positive at all) to avoid bear markets.

Buy SPY when its 12-month return is positive and higher than international stocks, otherwise buy AGG

Sector Rotation — Business Cycle

Different sectors outperform at different phases of the economic cycle.

Buy XLK when GDP growth is accelerating and federal funds rate is below 3%, sell and buy XLV when GDP is declining

William Bernstein — The Four Pillars

Broad diversification, tilt toward value/small, keep costs low, and rebalance mechanically.

No-Brainer Portfolio

Backtest equal allocation: 25% VTI, 25% VB, 25% VSS, 25% SHY — rebalance annually

Rebalancing Rules

Valuation-Informed Timing

Buy VTI when the 10-year treasury yield is above the 2-year yield, sell and buy SHY when the curve inverts