John Reese

Ten High Scoring Dreman Stocks with Low-Price Dividend Ratios

Taking a "contrarian" point of view, maybe now is the time to start looking at these types of out-of-favor stocks.

I agree, a deep value, contrarian approach has lagged the market over the last two years (I don't use leverage so the DHG example is not apples to apples with my investment portfolios) but that doesn't mean it won't be on of the top strategies for the next five years.

The article was simply trying to provide some insight on one criteria in Dreman's strategy that I thought readers may find interesting.

There’s Magic in Joel Greenblatt’s 'Magic Formula'

That's a great point, SMM. These types of approaches are trying to put the odds in your favor. They are not trying to get every stock pick right. That may seem counter intuitive for stock selection, but that that is the way these systematic models work. If you can get 50-60% winning positions over time you should do well.

There’s Magic in Joel Greenblatt’s 'Magic Formula'

Edward, that is a good point and thanks for the thoughts.

The models I’ve developed on Validea are all 10 and 20 stock portfolios. My reasoning – I want to make the models followable for the everyday, average investor. When you start talking 30, 40 or 50 stocks it becomes difficult for many to follow. The other thing is that I offer monthly, quarterly or annually rebalanced portfolios.

Your right that there will be a difference in the performance say between a 10 and 30 stock portfolio (like Greenblatt outlined), but I think the key thing here is that you are buying a basket of stocks that meet certain investment criteria and by doing this, you are putting the odds in your favor that a certain percentage of those stocks are going to be winners. If you find a strategy that gets 50-60% winning positions over time, that same winning percentage will apply to a 10, 20 or 30 stock portfolio.

Ben Graham Approach to Investing Outperforms the Markets

I appreciate the comments and thoughts guys. All very good points.

I am just getting started on Seeking Alpha, but you can find me on Forbes.com, RealMoney.com and at through my research site, Validea.com. I hope to post one interesting article per week and let’s see if I can get some good, valuable ideas out on the table.

Ben Graham Approach to Investing Outperforms the Markets

We will be soon releasing Greenblatt's Magic Formula on Validea. We have been tracking the 10 & 20 stock Magic Formula since 2005. Once we go live with the strategy, I will post the performance, current holdings and more on Seeking Alpha.