Screening Stocks by Institutional Ownership and Earnings Forecasts

Summary

This strategy combines institutional ownership with earnings forecasts to select equities. At each quarterly screening date, it ranks the market by institutional ownership and forms a pool from the 200 most institutionally held stocks. It then selects names in that pool whose published forecasts indicate earnings growth or a substantial increase. Holdings that remain on the new selection list are retained rather than sold and repurchased.

The report claims a backtest annualized return of 38.14% and says the return drawdown ratio stayed below 20% when the broad market did not collapse. It also identifies limitations: large-cap stocks in the selection pool may lag the index during bull markets, and the strategy has no market timing rule to avoid broad selloffs. The document does not specify the backtest period, benchmark details, transaction costs, or controls for using only information available at each decision date, so the reported performance is difficult to assess independently.

Key ideas

• The strategy screens for the 200 stocks with the highest institutional ownership at quarterly intervals.
• It further selects stocks with earnings forecasts indicating growth or a large increase.
• Existing holdings are retained when they continue to qualify.
• The report gives backtest performance figures but does not state the test period or transaction-cost assumptions.
• The strategy may lag in bull markets and lacks a broad-market timing filter.

Tags

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