Screening for High ROE, Price Amplitude, and Valuation Limits

Summary

This note proposes screening stocks for daily amplitude above 1%, a 2021 date condition, and return on equity above 15% for five consecutive years. Its final version adds valuation limits of price-to-earnings below 30 and price-to-book below 5. The rationale is to combine active price movement with a record of sustained profitability, then constrain valuation multiples. Example formulas and Python-like logic are included to illustrate the filters.

The author cautions that high ROE does not capture all business risks and that high-amplitude shares may carry greater risk. The note suggests adding technical signals and risk controls such as stop levels and diversification. It presents no backtest or evidence that the screen predicts returns. The 2021 condition also makes the stated screen historically specific, while the example implementation raises questions about how five-year ROE observations are aligned with the trading dates and whether the thresholds use consistent units.

Key ideas

• The proposed screen combines amplitude above 1% with five consecutive years of ROE above 15%.
• The final rules add P/E below 30 and P/B below 5.
• The note identifies elevated price movement and reliance on ROE as risks.
• It suggests diversification and stop levels as possible controls.
• The 2021 date condition and example implementation limit how directly the screen can be applied today.

Tags

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