The Validea strategy based on Joseph Piotroski offers value stock picks and detailed stock analysis using the published stock selection model of Joseph Piotroski. Learn more about Joseph Piotroski and his 9 point F-score ranking system, a value investing model whose stock picks gained % in the previous year. Joseph Piotroski. Stanford University. E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last.

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Joseph Piotroski

Bank, and Barclaycard, among others. Playing and investing oiotroski the stock market is a gamble. But you can decrease and manage investment risk when you have a strategy that works, like Joseph Piotroski. By the end of Decemberthe winning strategy for the year was from Joseph Piotroski with a You can see the rankings for yourself on the AAII scoreboards.

It was this paper that outlined 9 fundamental ranking criteria for picking winning stocks. During as the market sprang back to life, his strategy worked over 5 times better than his previous average. Piotroski uses low price to book stocks high book to market for his scan.

The 9 point fundamental scoring system F-Score has a binary value associated with each criterion. The more points a company earns, the better the stock pick is, and there is a maximum of 9 points. The following 9 points are carried out year over year, although a very keen investor may also choose to track smaller differences between quarters. This means that the bulk of your analysis will be performed after the annual report comes out, or you can also use 12 months of trailing data versus the 12 months of data before that to compare two annual periods at any given time.

How to Pick Winning Stocks that Gain 138.8% – Joseph Piotroski F-Score Value Investing Model

Why do these criteria matter as fundamental ratios to pick stocks with? We could categorize the 9 points into 3 broad categories important to most companies.

Profitability Having positive earnings metrics with the Return on AssetsCash Flow from Operationsas well as an Increase of Return on Assets for positive annual growth are crucial for strong value stocks. Leverage, Liquidity, and Source of Funds Basically, long-term debt is not desirable. A decrease in the Long-term Debt to Asset Ratioor a rise in assets if there is no debt, creates a better environment for a company to operate in.

Nobody likes the creditor banging on their door. An Increase in Liquidity is an important metric when considering if a company is well positioned to pay off debt. Also, generating monies from organic growth is also preferred to simply selling more shares. Point 7, Dilutionhighlights that cash generation from share-dilution is not optimum. An improvement in gross margin can indicate an improvement in cost, a reduction in inventory, or the ability of a company to increase its prices.


Higher asset turnover may show that the company is generating the same revenue on fewer assets they sold a bunch of equipment just lying aroundor sales have risen proportionately faster than asset purchase. Stocks able to achieve high points overall, perhaps scoring 8 or higher out of a possible 9 points, are viewed as picks worthy of buying.

A very low scoring stock with a total of 3 or less out of 9 points should either be avoided, or even sold short. Before you run out and buy all the stocks scanned using the 9 point F-Score system, note the associated risk factor.

What sort of stocks would turn up on such a scan? Below is a sample list generated around March 1, While we can now generate a list of stocks using 9 Fundamental Scoring criteria to build a portfolio that could separate winners from losers, we still might ask when is a good time to both buy stocks and sell stocks. Here are joeph few sample methods to consider:. While this is a suitable piotroskii to use for value investors that are willing to carry the extra risk of smaller cap stocks, not everyone is going to be drawn to the F-Score strategy.

There are investors who primarily use technical analysis for short-term buying and selling, high-growth investors, or those that prefer to buy story stocks when momentum rises. Nonetheless, buying stocks with deep intrinsic value on fundamental strength has historically proven to be a superior system than simple stock market averages. But sorting through the best offers can be tricky. At Money Crashers, we Taking an annual vacation is important. Excessive work hours and days lead to burnout, reduced employee engagement, higher absenteeism, lower piottoski, and higher costs Advertiser Disclosure X Advertiser Disclosure: Become a Money Crasher!

How to Pick Winning Stocks that Gain What is his system and how can you pick similar stocks? What are the 9 fundamental rankings that he uses to achieve these phenomenal gains?

Here are the 9 F-Score ranking criteria: This ratio is simply net income dividend by assets. It shows how well the assets are being utilized to generate profit. This ratio must be positive to get a point.

Validea: Joseph Piotroski – Value Stock Picks

It is viewed as a measure of net income. This can be carried out using fiscal year over year, or trailing 12 months versus the 12 months before that. Cash Flow from Operations. This is another net income gauge. Many investors consider cash to be king. A company with increasing net profits but negative cash flow is not what you want. Cash is king and you want to see growth in real money instead of pioroski tricks to boost an earnings report.

One point is given if cash flow is positive. Again, this can be carried out using fiscal year over year, or trailing 12 months versus the 12 months before that. Increase of Return on Assets. If so, the stock gains another point. Remember, this can be carried out using fiscal year over piotroki, or trailing 12 months versus the 12 months before that. If net income, as defined by ROA, is higher than cash flow, this may spell disaster for future profitability.


Cash is needed to pay dividendsemployee wages, and debt. Cash flows should exceed ROA to get a point. Once again, this can be carried out using fiscal year over year, or trailing 12 months versus the 12 months before that. Long-Term Debt to Asset Ratio. Did the leverage piotrooski fall? If so score one. If long-term debt rises faster than profitability, this could harm a company. Year over year data makes this easy, as well as using 12 month trailing data versus the 12 months before it.

The Current Ratio is achieved taking your assets and dividing them by your liabilities.

If the liquidity improved, the stock gets another point. Same year over year criteria as the above points. Did joselh company offer more shares? If so, no point is awarded to the company. Dilution might be necessary for piitroski small company with little cash on hand, but it devalues the share value and is a slippery slope to go down.

Companies that continually dilute need to be growing at very fast rates to overcome their self-inflicted inflation.

Otherwise, another notch is earned. You can use the same annual or trailing data mentioned on all the other points. An joesph in gross margin could highlight that the company was able to increase prices, or that some other cost went down.

If gross margin goes up, another point is added. Need I say it again? You can analyze year over year or 12 months over 12 months for this number. Did the asset turnover increase year over year? Then perhaps the efficiency of operations is increasing or sales are up. If this ratio grew, then the final point is earned. Why These 9 Points Piotrosmi Why do these criteria matter as fundamental ratios to pick stocks with? Increasing Both Risk and Ojseph Before you run out and buy all the stocks scanned using the 9 point F-Score system, note the associated risk factor.

With a larger upside comes a larger risk factor. What are some current high F-Score stock picks? Here are a few sample methods to consider: Analyze the past month period.

Pick the strongest stocks when looking at price performance. You can hold for the following months depending on whether you prefer to hold stocks for a shorter or longer period of time. The idea is pjotroski past winning stocks will be future winning stocks. This theory is proved in the paper called Momentumwritten by Narasimhan Jegadeesh and Sherdan Titman in This simple strategy delivers around 1. They found that staying invested in stocks based on momentum from the prior 13 — 60 months actually joxeph to mixed or negative results.

These stocks are picked when earnings, leverage, and efficiency improve.