CRESSCAP BACKTEST

 

Over 16 years, Longs have significantly outperformed the major benchmarks

Annual Gross (%)
Cress Long Screen
Cress Short Screen
HFRI Equity Hedge
Russell 3000
S&P 500 TR Index
Total Cumulative
789.53
15.93
108.76
91.71
76.62

CressCap Study Methodology

Returns generated from 12/31/1999 to 09/30/2015; monthly rebalancing, equal weighting. The performance here is shown as the cumulative returns based on the basket of stocks which has passed the long criteria of having positive value, growth, long term momentum and earnings revisions, as defined according to our styles. Total return calculations in Bloomberg. EQBT backtesting uses EQS screens created by Cress Capital Management, monthly rebalancing and equally weighted upon rebalance. Number of stocks in long and short baskets differ at each rebalance. Long> Short implies more stocks have favourable characteristics. Above, displays cumulative performance of each basket separately. In the above, we are displaying the return to being both long the long and short baskets; this is to demonstrate long selection systematically outperforms whilst short underperforms relative to the HFRI. For illustrative purposes only. We are not soliciting or recommending any action based on this material. Past performance is not indicative of future results.

WALL STREET ANALYSTS BACKTEST

Factset backtests over 10 years demonstrated sell-side analyst ‘Hold’ recommendations performed best, followed by the ‘Overweights’.  Lastly, ‘Buy’ recommendations underperformed the S&P 500 by 13.3% cumulatively.

Factset Study Methodology In three fractiles, the group with the lowest percentage of sell or underweight ratings (an average of 4.4% of holdings over 10 years)—returned 15.9 percentage points greater than the S&P 500, whereas the bottom group returned 25.7 percentage points lower than the index (with an average of 14.2% of holdings with sell or underweight ratings). Zero equities in the S&P 500 carry a median consensus sell rating as of the end of October, and analysts rate only one as underweight. Among the three ratings groups that actually get meaningful activity (buy, overweight, and hold), backtests over 10 years indicate results that are in direct contrast to analyst sentiment: the holds actually performed best, then the overweights, and then finally the buys, which underperformed the S&P 500 by 13.3% cumulatively. sell- and underweight-rated equities, though uncommon, do tend to underperform. These equities returned 57.2 and 98.9 percentage points lower than the S&P 500 over the cumulative 10-year period. Short sellers and other absolute return strategies may be able to capitalize on these investments, but their pool of opportunities is also small—just 0.3% of S&P 500 equities had either a sell or an underweight rating in a given month over the 10-year period. Reference Article: When It Comes to Analyst Ratings, Look to the Bears By Michael Amenta | Nov 6, 2017