Screening Stocks for High Amplitude and Sustained ROE

Summary

The document describes an equity screen requiring price amplitude above 1, return on equity above 15% for five consecutive years, and more than three years since listing. It presents these conditions as a way to combine active trading with a record of profitability and operating history. The article also suggests adding valuation, revenue and profit growth, and cash flow checks to make the selection more complete.

It provides example formulas and sample code, but no backtest, performance figures, or statistical evidence that the screen predicts returns. The write-up flags omissions such as valuation and market risk, and notes that high-amplitude stocks can be sensitive to sentiment. The implementation examples may not precisely match the prose: the amplitude formula uses a price difference threshold, while the Python example checks grouped ROE data in a way that may not ensure a five-year history for each stock. Treat the conditions as a screening idea requiring data and implementation validation.

Key ideas

• The proposed screen combines amplitude above 1 with ROE above 15% for five consecutive years.
• It also requires a listing history longer than three years.
• The article recommends adding valuation, growth, and cash flow measures for broader assessment.
• It provides no empirical test showing that the screen produces superior returns.
• High amplitude can coincide with greater sensitivity to market sentiment.

Tags

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