Performance of Price Projector
Channel Trend White Paper, April 25, 2011
Using our Price Projector, Channel Trend has calculated the price appreciation potential of stocks for many years. The stocks are ranked from #1 (best upside potential) down to the lowest ranked.
Price Projector systematically captures information that can be used to trade stocks better than random stock picking. We believe this is conclusively proven by the following analysis of our rankings from December 27th 1996 through April 15th 2011.
The population of ranked stocks consists of approximately 1700 stocks of leading companies in 84 industries. For purposes of this presentation, we have divided our stock rankings into ten deciles. Each decile thus consists of approximately 170 stocks. Decile 1 is comprised of those stocks that are ranked in the top 10% of the population of stocks in our coverage, i.e., the top 170 stocks. Decile 2 consists of the stocks in the 2nd 10%, and so on.
Here are the highlights:
- The average annualized percent change in price of the entire population of stocks was 10.20%. This is the benchmark we use to grade our own performance.
- Against that benchmark, we have compared the performance of each of the deciles.
- The top decile had an average annualized rate of return of 19.08%, which is 8.88 percentage points better than the population average of 10.20%.
- The bottom decile had an average annualized rate of return of 7.08%, which is 3.12 percentage points below the population average of 10.20%.
- In our opinion the six middle deciles do not convey sufficient information to be useful for portfolio management purposes.
- Decile 2 had an average annualized rate of return of 14.32%, which is 4.12 percentage points better than the population average of 10.20%.
- Decile 9 had an average annualized rate of return of 6.42% which is 3.78 percentage points worse than the population average of 10.20%.
- While Deciles 2 and 9 contain meaningful information, we have found over time that the best purchase and short-sale opportunities are found in Decile 1 and Decile 10.
The Decile-by-Decile performance, and the performance of the average of the population, is shown in the graph below.
