[GPGT]Invest in predictable companies for better returns
I just saw this chart on the net that shows that if you invest in 5 star rated predictable companies you can get better return and avoid loser stocks.
I think I will use this in FATA. When I go further to find out the definition of 5 star, it seems like they didnt really define it well. Need to pay money to get more information.
refer to the distribution chart below to see the research they done
[Image: t9ZD1W8.png]
Maybe they use the power of hindsight?
Personally, I think they have to share some info. If they had invested in a "fundamentally strong" company like China Milk in 2009, it would have totally screwed their chart.
(13-09-2014, 09:53 AM)natnavi Wrote: [ -> ]Maybe they use the power of hindsight?
Personally, I think they have to share some info. If they had invested in a "fundamentally strong" company like China Milk in 2009, it would have totally screwed their chart.
Overwhelming majority of China companies are not fundamentally strong, regardless of what they publish in their annual reports. They play by different rules and moral values.
You may want to take a leaf from Joel Greenblatt - The Little Book that still Beats the Market. His claim is that the Magic Formula is monotonically increasing i.e. all higher ranked deciles outperform all lower ranked deciles. That is a (claimed) level of predictability I have not found anywhere else.
Hi Wahkao,
Actually, I'm personally surprised with this chart. May I know which source did you pluck out from - no credits?
In 2007/2008, sub-prime crisis moments, even triple A graded bonds or stocks did not survive the aftermath. What makes this chart's degree of predictability accurate in the first place. As you mentioned earlier in the risk-to-reward ratio, 5-stars company quadrant may fall under low-risk but not no-risk.
Do clarify, thanks.