Our strategy is a fundamental strategy that selects companies from higher percentiles of fixed asset turnover ratio and finds if they are trading below their book value. Although it's not a momentum strategy, we found that the strategy has a tendency to pass benchmark returns with showing low beta. This long-only strategy has achieved returns of 86% on Q3000US universe since 2016 with a Sharpe Ratio of 1.24 and 10% of Alpha and a Beta of 0.49.
The backtest also shows that the strategy is good for minimizing negative market effects especially the ones which started to occur with "Trade Wars". Although there is no factor regarding momentum,
Rules of the Strategy:
Universe: Utilities Sector Companies within Q3000US
(Fundamental) Book Value Yield: Companies with PV/BV ratio of 1 or less.
(Fundamental) Fixed Asset Turnover: Top 30 percentile of Companies with higher Revenue/Fixed Assets
Rebalance: Every Month Start
Although there is no factor regarding momentum, the strategy has showed great performance over last 4-5 years. Please let us know for further developments in the code. I'd like to get your feedback.
Zafer Ismail Anik
Master of Finance
