10 Stocks for Both Value and Momentum Investors

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 |  Includes: AIZ, BG, L, LM, LNC, PRU, RGA, UNM, XL, ZION
by: Insider Monkey

The three most common stock market anomalies are investing in small cap stocks, value stocks, and momentum stocks. Investors usually follow one or the other. James O'Shaughnessy combined value and momentum investing strategies in his book "What Works on Wall Street." One of the screens he devised first picks the stocks that have price-to-book ratios below one, and then buys the ones with the highest one-year price appreciation.

In a 52-year back testing this strategy returned an average annual compound return of 18.3% vs. 13% for the entire market. This strategy beats the market by more than 5 percentage points. Of course, this is based on average returns and annual performance of the strategy may significantly deviate from these values. We obtained the list of value stocks from Google Finance and ranked these stocks based on their 1-year returns.

Here are 10 stocks with at least a billion dollars in market value and liquid stocks that satisfy O’Shaughnessy’s screens:

Company name

Symbol

Market Cap

Price to Book

52w Price Change (%)

Reinsurance Group of America

RGA

4.39B

0.87

19.82

XL Group plc

XL

6.79B

0.66

18.32

Legg Mason, Inc.

LM

5.12B

0.93

15.87

Assurant, Inc.

AIZ

3.90B

0.81

15.5

Bunge Limited

BG

9.89B

0.87

12.46

Loews Corporation

L

17.50B

0.94

11.21

Unum Group

UNM

8.00B

0.92

10.6

Zions Bancorporation

ZION

4.24B

0.92

10.05

Prudential Financial, Inc.

PRU

29.69B

0.92

9.57

Lincoln National Corporation

LNC

9.42B

0.74

9.5

Click to enlarge

The top half of the list seems to have more potential than the bottom half of the list. Prominent hedge funds that we follow preferred investing in only three of these stocks. Jim Simons’ Renaissance and Martin Zweig’s Zweig-DiMenna have Prudential Financial in their portfolios. Leon Cooperman’s Omega Advisors have XL Group in its portfolio. Viking Global’s Andreas Halvorsen is bullish about Lincoln National.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.