A Monthly Revenue-to-Market-Capitalization Stock Selection Factor

Summary

The post proposes a simple equity-selection strategy based on revenue relative to market capitalization. It first requires positive year-over-year growth in the latest reported total revenue. Eligible stocks are then ranked by the previous year’s total revenue divided by market capitalization from the preceding trading day. The portfolio is rebalanced monthly and holds no more than five stocks.

The author says an initial backtest looked promising, but the post provides no performance figures, benchmark comparison, risk measures, or details about data handling. It therefore describes a testable factor hypothesis rather than evidence that the strategy is robust. The rules also leave practical questions unanswered, including how to handle reporting delays, liquidity, transaction costs, and changes in market capitalization between ranking and execution. The method is a compact starting point for research, but the available text is insufficient to assess its out-of-sample performance or implementation quality.

Key ideas

• The strategy requires positive year-over-year growth in the latest reported total revenue.
• Eligible stocks are ranked by prior-year revenue divided by the previous day’s market capitalization.
• The portfolio rebalances monthly and holds at most five stocks.
• The author reports favorable initial backtest results but provides no supporting performance or risk statistics.
• Reporting lags, trading costs, liquidity, and out-of-sample robustness are not addressed in the post.

Tags

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