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O’Shaughnessy

An Overview of the O’Shaughnessy investment strategy

Source: This page represents two screens tracked by Sum of Some, the O’Shaugnessy Growth strategy defined by the MSN Custom Screener and the O’Shaugnessy HFCGX which mimics the investment strategy of the Hennessy HFCGX fund.  Both are modified versions of O’Shaugnessy’s original research.

O’Shaugnessy Period of Reign: 1990s – Current

Associated With:Bear Stearns, O’Shaughnessy Assett Management, Hennessy Funds

Background: O’Shaughnessy conducted large amounts of back dating and technical analysis to arrive at two key investment methods, a value and a growth strategy.  He left Bear Stears to start O’Shaughnessy Assett Management and created the two funds based on these two strategies, calling them the Cornerstone Growth and Cornerstone Value funds.  They performed well, but not stellar, and he sold them to Hennessy funds who tweaked the strategies and offered the HFCGX (growth) and HFCVX (value) funds which have since shown 5-year returns (from 2001) of 16.6% compared to the S&P’s -1.3%.

James O’Shaughnessy Books

To be added.

Additional James O’Shaughnessy Resources

(1) Stock Screen Parameters to Mimic the O’Shaugnessy Growth Investment Style

The below bullet points attempt to recreate O’Shaughnessy’s investment style based on discussion in his books.  These O’Shaughnessy investment criteria come from MSN.  Do not confuse these with the article from Harry Domash about O’Shaughnessy published on MSN; this article is closer to the second attempt to mimic O’Shaughnessy, listed below.  These are run using the MSN stock screener.  The text in italics explains how the parameter was defined in the screener.

1) Size: Look for companies that have a bit of size and stability

Parameter: Market Capitalization >= 150,000,000

2) Value: Look for a low P/E ratio relative to the expected growth

Parameter: P/E Ratio: Current / EPS Growth Next 5 Years <= 1

3) Growth: Look for expected growth in the short and long term

Parameter: EPS Growth Next Year >= 20
Parameter: EPS Growth Next 5-Years >= 20

4) Stock Price: Look for a stock whose price has shown strong growth in the mid-term

Parameter: % Price Change Last 6 Months: High as Possible

(2) Stock Screen Parameters to Mimic the O’Shaugnessy HFCGX Investment Style

The below bullet points attempt to recreate O’Shaughnessy’s investment style based on the tweaked method by Hennessy Funds.  These are run using the MSN stock screener.  The text in italics explains how the parameter was defined in the screener.

1) Size: Look for companies that have a bit of size and stability

Parameter: Market Capitalization >= 175,000,000

2) Value: Look for a good value by finding a low price to sales ratio

Parameter: Price/Sales Ratio <= 1.5

3) Growth: Look for a company with positive growth in the past year

Parameter: EPS Growth Year vs Year >= 1

4) Relative Strength: Look for a stock whose price has grown more strongly than the rest of the market in the short, mid, and long term

Parameter: 3-month Relative Strength: >= 90
Parameter: 6-month Relative Strength: >= 90
Parameter: 12-month Relative Strength: >= 90