There is an interesting article in yesterday's WSJ of the above title that I would recommend to read. It's written by Jason Zweig, a well known investment guru. Here is some excerpt from the paper copy:
Believe it or not, there could be a new holy grail for investors. ....
Basically what he is saying is that you take the gross profit and divide it by the total assets and you should seek for >0.33. combine this with the value investing (he mentioned p/b of <1.7) and a bit of momentum.....you would get the out performance. He sited some stats to back it.
all investing theories have some stats. but they are disproved in a few years time. there are just so many variations & formulaes that any formula you propose would have a few examples to back it up. so i will take it with a pinch of salt
Seems to be a "buy good roa, then make sure a isnt too expensive" type formula. Intuitively this makes sense but i wonder how many names it shakes out.
Yes it's just m modified roa
Jason Zweig isn't an investment guru. He is more akin to a financial journalist with top notch exposure to public with his weekly columns in WSJ and being the editor for Ben Graham intelligent investor.
He may have more exposure than common people to top investment gurus, but that doesn't make him one.
Jason Zweig became a personal finance columnist for The Wall Street Journal in 2008. He was a senior writer for Money magazine and a guest columnist for Time magazine and cnn.com. He is the author of Your Money and Your Brain (Simon & Schuster, 2007), one of the first books to explore the neuroscience of investing. Zweig is also the editor of the revised edition of Benjamin Graham's The Intelligent Investor (HarperCollins, 2003), the classic text that Warren Buffett has described as "by far the best book about investing ever written."
Before joining Money in 1995, Zweig was the mutual funds editor at Forbes. Earlier, he had been a reporter-researcher for the Economy & Business section of Time and an editorial assistant at Africa Report, a bimonthly journal. Zweig has a B.A. from Columbia College, where he was awarded a John Jay National Scholarship. He also spent a year studying Middle Eastern history and culture at the Hebrew University in Jerusalem, Israel.
A frequent commentator on television and radio, Zweig is also a popular public speaker who has addressed the American Association of Individual Investors, the Aspen Institute, the CFA Institute, the Morningstar Investment Conference, and university audiences at Harvard, Stanford, and Oxford.
Zweig was for many years a trustee of the Museum of American Finance, an affiliate of the Smithsonian Institution. He serves on the editorial boards of Financial History magazine and The Journal of Behavioral Finance. Jason Zweig is not related to money manager Martin E. Zweig.
http://www.jasonzweig.com/about.html