What Works on Wall Street

by James P O’Shaughnessy

After reading What Works on Wall Street, investors will know the following:

• Most small-capitalization strategies owe their superior returns to micro-cap stocks with market capitalizations below $25 million. These stocks are too small for virtually any investor to buy.
  
  

• Buying low price-to-eamings ratio stocks is very profitable only if you stick to larger, better-known issues.
  
  

• Price-to-sales ratio is the best value ratio to use for buying market-beating stocks
  
  

• Last year's biggest losers are the worst stocks you can buy.
  
  

• Last year's earnings gains alone are worthless when determining if a stock is a good investment.
  
  

• Using several factors dramatically improves long-term performance.
  
  

• You can do four times as well as the S&P 500 by concentrating on large, well-known stocks with high dividend yields.
  
  

• Relative strength is the only growth variable that consistently beats the market.
  
  

• Buying Wall Street's current darlings with the highest price-to-earnings ratios is one of the worst things you can do.
  
  

• A strategy's risk is one of the most important elements to consider.
  
  

• Uniting growth and value strategies is the best way to improve your investment performance.