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Morningstar portfolio with fundamental grades of A or B (Growth, Profit, and Financial Health)
Tristan Rhodes
posted Aug 21, 2015

Trading Strategy using Fundamental Data 

1. Find all stocks that have Morningstar grades of (A or B) in all three categories  
2. Filter the top 100 largest companies by market cap  
3. Purchase equal amounts of each stock  
4. Rebalance every month, removing stocks that no longer match the fundamental filter

I tried several different variations of this algo, but the "(A or B) * 100 stocks" parameters provided the best results.

NOTE:

A) I couldn't run this backtest any farther in the past, or the backtest would stall and not trade anything. (I posted about this problem)

B) The algo seemed to be collecting more than 100 stocks as time went by. Why is this happening? (acquisitions, delisting, etc)

C) Somehow I managed to short a stock, even though this is a long-only algo! How could this possible happen?

1 response
Gus Gordon
Aug 22, 2015

Interesting, thanks for sharing. I wonder what would happen if you hedged against the stocks with the worst grades - I might try that if I get a chance. Could also consider filtering for stocks above a certain market cap.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.