Baidu: The Largest Stock To Top The Piotroski F-Score With Graham Enhancement For March

by: JD Henning

Baidu Inc. at $58.23 billion market cap is by far the largest stock to top the Piotroski-Graham enhancement selections for March.

Four new Piotroksi-Graham value selections with the highest F-scores across the markets.

The March 2018 one-year buy/hold concludes today with an annual return of 12.03% beating the S&P 500 +2.60% over the same period.

The Piotroski model remains the top performing value model in financial research and as tracked by the American Association of Individual Investors with 22.4% annualized returns over 16 years.

These selections continue as an ongoing test and active portfolios for members looking for value stocks using one of the best fundamental value models in the financial literature.

Piotroski Value Portfolio YTD Returns

The March 2019 selections comprise the 12th portfolio since 2017 formed to test the one-year buy/hold portfolios of the Joseph Piotroski Value algorithm that remains one of the best performing value-based selection models in financial research.

Retests of the Piotroski model continue to outperform all other top value algorithm models as most recently shown in the financial literature according to Amor-Tapia, B. & Tascón, M.T. (2016). The selections offered here also continue to include the Benjamin Graham enhancements described in the methods section below.

The one-year buy/hold March 2018 Piotroski-Graham portfolio has produced an annual return of +12.03% beating the S&P 500 return of 2.60% over the same period. The two-month gains from the January 2019 Piotroski-Graham portfolio has returned +13.52% showing strong value opportunities in the current market. My enhanced portfolio application is beating the AAII Piotroski benchmark of 8.4% and also ahead of the S&P 500 return of 11.08% over the same period.

Piotroski-Graham Portfolio Returns since August 2017

This chart depicts all the returns of each of the tested Piotroski portfolios. Columns in blue represent completed annual returns. The black line represents returns since the formation of each portfolio. Average annual returns of all the completed one-year portfolios is +3.02% with 4/6 portfolios beating the S&P 500 in their respective time periods.

The draw down of this portfolio through some of the worst months on record in the past year remains relatively low and safe compared to many other portfolios and hedge funds returns in 2018. This is quite consistent with the findings that analyzed several of the top value algorithms in Amor-Tapia, B. & Tascón, M.T. (2016) and found Piotroski to be the top performer.

4 of the 8 stocks from the original March 2018 portfolio were positive after one full year led primarily by two stocks:

Planet Fitness (PLNT) +58.95%

Ingevity Corporation (NGVT) +52.05% My enhanced Piotroski-Graham portfolio from March 2018 has for the second year in a row outperformed the American Association of Individual Investors version of the Piotroski high F-score portfolio.

March Enhanced Piotroski - Graham Value Selections

The 4 new selections for March have the highest Piotroski F-Scores of all the stocks screened across the US markets with a share price above $2 and average daily volume over 100k shares. In addition, the Benjamin Graham enhancements have been applied on the basis that these characteristics are well documented to deliver excess annual market returns. More information on the Graham Number formula can be found at the end of the article.

The following top four Piotroski stocks also include only those stocks with more than a 35% positive difference in price from where the Graham number assesses current stock value. These criteria are regarded as some of the best fundamental ratios and scores for selecting value stocks. This list is as follows:

These selections are based entirely on the academic algorithms documented in the modeling section at the end of this article and my own preset modeling parameters of minimum trading volume and price. Value selections are intended for a one-year buy/hold methodology of undervalued fundamental characteristics.

1. Baidu (BIDU) - Technology / Internet Information Providers Baidu, Inc. provides Internet search services in China and internationally. It operates through two segments, Baidu Core and iQIYI. The Baidu Core segment offers products for uses, including Baidu App to access search, feed, and other services using mobile devices; Baidu Search to access its search and other services through mobile browsers; Baidu Feed that provides users with personalized timeline to meet their personal interests reflected in their past online behaviors; and Bear Paw Account that enables verified brands and businesses to aggregate their content from Websites, wapsites, and open-platform apps.

2. Teck Resources Limited (TECK) - Services / Shipping Teck Resources Limited researches, explores for, develops, and produces natural resources in the Americas, the Asia Pacific, and Europe. It operates through five segments: Steelmaking Coal, Copper, Zinc, Energy, and Corporate. The company's principal products comprise steelmaking coal; copper concentrates and refined copper cathodes; refined zinc and zinc concentrates; energy products, such as bitumen; and lead concentrates.

3. Teekay LNG Partners (TGP) - Services / Shipping Teekay LNG Partners L.P. provides marine transportation services for liquefied natural gas ((LNG)), liquefied petroleum gas ((LPG)), and crude oil worldwide. The company operates through two segments, Liquefied Gas and Conventional Tanker.

4. Ternium S.A. (TX) - Basic Materials / Steel & Iron Ternium S.A., through its subsidiaries, manufactures and processes various steel products in Mexico, Argentina, Paraguay, Chile, Bolivia, Uruguay, Brazil, the United States, Colombia, Guatemala, Costa Rica, Honduras, El Salvador, and Nicaragua. It operates in two segments, Steel and Mining.

Introduction to Piotroski F-Score Methodology

This article continues the series of testing the best value investment research over a one-year time horizon for well documented and substantial value investing returns. This study is testing the Piotroski F-score model to see how many of the different value portfolios formed each month can outperform the market over a year long period.

These Piotroski value selections are designed as a more stable, long-term investment approach to identify highly oversold stocks, in contrast to the Weekly Breakout Forecast based on highly volatile, short-term momentum stocks. The value selection formulas have been well documented in the financial literature over the past 17 years to consistently outperform benchmark indexes.

  • The Piotroski stock selections above build on the findings from the Amor-Tapia & Tascon (2016) research that evaluates top selection models in more detail in the initial August report that found the Piotroski model to be one of the best models tested for value investment selections.
  • The American Association of Individual Investors also documents their own multi-year test results of the Piotroski F-score as one of the best performing models with 16 year annualized total returns of 19.3% from among dozens of selection models that they monitor.
  • The Enhanced Piotroski portfolios selected here are greatly outperforming the AAII Piotroski portfolio for all monthly test portfolios and also substantially outperformed the AAII Piotroski 2018 returns of -36.1%

The Piotroski-Graham Enhanced Portfolio tracking sheet maintains all the performance results for Members' with live updates. It is also now being fed into the V&M Dashboard for inclusion in other breakout timing models and consideration for the Premium Portfolio.

Background on Value Scoring Systems

Calculating scores and assigning values to stocks based on fundamental data remains one of the most popular methods for value stock investing. Most of us are familiar with such scoring systems as the Value Line Rank (started in 1965), the CANSLIM composite ranking system (started in 1988), the Zacks Rank (started in 1982, first made public in 1992) and many other popular systems that have given us good results over the years. To this day it is not uncommon to find substantial overlap among the best stocks identified by different value ranking methodologies. Most medium to long term investors are well served by taking these models into consideration.

Less well known are the academic composite value models based on fundamentals that continue to be rigorously tested in peer-reviewed financial literature. Some of these published models have their measurement scoring integrated into publicly available stock screens from various stock analysis websites. One of the best academic models retested recently by Amor-Tapia and Tascon (2016) is the Piotroski score model created by Joseph Piotroski in 2000:

The Piotroski (2000) FSCORE: The Score consists of aggregating nine individual binary signals derived from accounting variables related to profitability. The most favorable value score is 9 and the least favorable is zero. (Amor-Tapia &Tascon, 2016)

The Graham Number: The Graham Number value score results from a formula developed by Benjamin Graham that is based on his assessment that good value stocks should have a P/E ratio below 15 and a P/B ratio below 1.5:

This Graham Number value equals the square root of 22.5 x EPS x P/B. Because it leaves out many other important characteristics it is better applied as an enhancement to the highly successful Piotroski F-Score value selection model.


The Piotroski F-Score model has been well documented in the financial literature and by practitioners to generate significant abnormal returns on an annual basis. This value model remains one of the top selection models among dozens also tracked by the American Association of Individual Investors.

For the second year in a row this Enhanced Piotroski model has outperformed the AAII Piotroski selection model and is even outperforming the S&P 500 over one-year and YTD 2019. The enhanced model selections also eliminates financial outliers and low-priced stocks that may jeopardize the best performance results possible. This is the monthly selection report for subscribers.

As always, I trust this will be a profitable contribution to your investment objectives!

JD Henning


Amor-Tapia, B. & Tascón, M.T. (2016). Separating winners from losers: Composite indicators based on fundamentals in the European context *. Finance a Uver,66(1), 70-94.

Piotroski, J. D. (2000). Value investing: The use of historical financial statement information to separate winners from losers. Journal of Accounting Research, 38, 1-41.

Graham, B. (1949). The Intelligent Investor: The Definitive Book on Value Investing

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.