A Chinese Stock Screen Combining Low Valuation and Graham-Style Financial Tests

Summary

The document translates Benjamin Graham’s enterprise-owner approach into quantitative tests and then proposes a version adapted to Chinese equities. The original framework emphasizes liquidity, manageable debt, a record of profits and cash dividends, earnings growth, and a share price constrained by tangible asset value. The adapted screen adds positive valuation ratios, selects low price-to-earnings stocks, applies a price-to-book ceiling, and checks working capital, borrowing, profitability, dividends, and earnings growth. It holds 30 stocks and rebalances monthly.

The proposed risk controls sell an individual holding after a 7% loss from cost, or liquidate all holdings after a sharp market decline over five days. The article reports a backtest from January 2014 through June 2017, including annualized return, benchmark return, maximum drawdown, win rate, and average holdings. These historical figures do not establish future performance; the document gives limited detail on implementation, transaction costs, survivorship bias, or other robustness checks.

Key ideas

• Graham’s original framework combines balance-sheet strength, stable earnings, dividends, earnings growth, and a valuation ceiling.
• The adapted Chinese equity screen ranks stocks by low price-to-earnings ratios and applies financial health and dividend filters.
• The proposed portfolio holds 30 stocks and rebalances monthly.
• The strategy includes individual-loss and broad-market sell rules.
• The reported backtest covers a limited historical period and does not establish future performance.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.