I've posted here a few times before, mainly in regards to value investing and a model I was developing myself. I've done some trial and error backtesting however I just want to gain some thoughts on if what I have done so far carries any weight or its not an accurate measure on whether my method will provide superior returns.
First i'll run you through my methodology in basic terms. I've set up a screener to provide companies with high ROE and low D/E. I then run the financials and come up with my intrinsic value. I further screen all these companies by only concentrating on those which are greater then 15% below their intrinsic value. I have a scoring system that i've devised to rank the stocks and it leaves me with approx 7-8 stocks.
From these, i chose to look at 5 stocks. Now my plan is to update my original screen every sunday and my spreadsheet picks up if any of the stocks have changed details, the ones that have changed details, i update their financials and go from there. So basically once a week I should pick up the new opportunities, which means reporting periods are my main times of picking up these opportunities.
Therefore the most recent i've looked at are the financial from August/September 2010 for my screen and the financials i've looked at etc.
So what i've done is said well hey if I bought these 5 stocks at the start of november because I was late doing my analysis, I still would have made x amount if I bought $5,000 worth of each stock.
It worked out I roughly would have made about a 13.7% return in 2 months while the ASX moved about 0.5%. If I look at the 3 months, that return becomes about 27.2% vs the asx of about the same, 0.5%.
Now I understand testing this once doesn't prove my methodology is correct in any way, but just want to know if this is kinda going the right way about it, and if so I can then look at how my process would have worked after previous reporting periods.
Thoughts? BTW the 5 stocks were LYL, FGE, MML, NCK and ACR.