The Daily Workshop
by Robert Sheard (TMF Sheard)
LEXINGTON, KY. (Nov. 5, 1997)
Scroll to the bottom for year-to-date Growth and Value Screen results.
Have you ever wondered what the best stocks have been in terms of risk-adjusted performance? Good, glad you asked.
The Sharpe Ratio is a measure of return per unit of risk. And one way to calculate this for individual stocks is to take the stock's total return over a given period (three, five, ten years, perhaps) and divide that by the standard deviation over the same period. It's completely backward looking, of course, but it does point to stocks that have not only performed well, but that performed well without inordinate risk.
Today, for informational purposes only, I'll post the best performers based on Sharpe Ratios over these three periods. I'm not sure how one might incorporate this statistic into a current investment decision, but the information is interesting, at least to me.
Past Three Years: Dell Computer (Nasdaq: DELL) Interstate Bakeries (NYSE: IBC) U.S. Trust (Nasdaq: USTC) Exxon Corp. (NYSE: XON) Star Banc Corp. (NYSE: STB) United Technologies (NYSE: UTX) Global Marine (NYSE: GLM) Tyco Int'l Ltd. (NYSE: TYC) DEKALB Genetics 'B' (NYSE: DKB) Pfizer, Inc. (NYSE: PFE) Past Five Years: Clear Channel (NYSE: CCU) Robert Half Int'l (NYSE: RHI) Tellabs Inc. (Nasdaq: TLAB) HBO & Co. (Nasdaq: HBOC) Citicorp (NYSE: CCI) McKesson Corp. (NYSE: MCK) Corrections Corp. (NYSE: CXC) Star Banc Corp. (NYSE: STB) U.S. Trust (Nasdaq: USTC) U.S. Bancorp (NYSE: USB) Past Ten Years: Cedar Fair L.P. (NYSE: FUN) Clear Channel (NYSE: CCU) DQE (NYSE: DQE) Coca-Cola (NYSE: KO) Microsoft Corp. (Nasdaq: MSFT) Home Depot (NYSE: HD) Fastenal Co. (Nasdaq: FAST) NIPSCO Inds. (NYSE: NI) IPALCO Enterprises (NYSE: IPL) Buckeye Partners L.P. (NYSE: BPL)
If you limit the field to the 100 largest stocks (as I tend to do with my own investing), the list becomes much more recognizable and predictable. For example, here's the list of best performers over the last three years:
Dell Computer (Nasdaq: DELL) Exxon Corp. (NYSE: XON) United Technologies (NYSE: UTX) Tyco Int'l Ltd. (NYSE: TYC) Pfizer Inc. (NYSE: PFE) Eli Lilly (NYSE: LLY) Bristol-Myers Squibb (NYSE: BMY) Allstate Corp. (NYSE: ALL) General Electric (NYSE: GE) U.S. Bancorp (NYSE: USB)
Monthly Growth Screens (Jan. 3 to present) 90.36% Relative Strength 33.59% EPS Plus RS 33.56% Investing for Growth 26.04% S&P 500 Index 22.33% Formula 90 18.75% Unemotional Growth 17.86% YPEG Potential 13.79% Low Price/Sales Annual Value Screens (Jan. 1 to present) 22.80% Dogs of the Dow 22.45% Beating the S&P 22.08% Dow Combo 20.75% Foolish Four 20.46% Unemotional Value 20.46% Beating the Dow 19.30% Dow Jones Ind Avg