O’Shaughnessy-Inspired Large-Cap Value Screening for Chinese Equities

Summary

This article turns James O’Shaughnessy’s value-investing principles into a monthly Chinese equity screen. It favors companies larger than the market median in market capitalization and share capital, then ranks stocks using cash-flow yield, sales yield, and dividend yield. The stated process selects the top 400 by each of those three measures and takes the first 30 stocks satisfying the five conditions. The article’s rationale is that larger, more liquid leaders may offer attractive long-run returns, while cash flow, sales, and dividends provide valuation and income signals that may be less susceptible to earnings manipulation.

The portfolio is rebalanced monthly, with a stock sold if its price falls 7% below cost; a 13% broad-market drop within five days triggers liquidation of all positions. The article reports a historical test from January 2014 through June 2017, with annualized strategy and benchmark returns, maximum drawdown, win rate, and average holdings. These figures are historical results, not evidence of future performance. The post gives limited detail on execution, costs, or robustness, and its simplified description does not establish how the screening rules behave across other periods or market conditions.

Key ideas

• The screen combines above-median company size with cash-flow, sales, and dividend yield rankings.
• It selects 30 stocks meeting the stated size and ranking filters and rebalances monthly.
• A stock-level loss threshold and a sharp market-drop rule are used as exit controls.
• The article reports results for a historical test period, but those results do not establish future performance.
• The description does not provide enough detail to assess trading costs or robustness across other periods.

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