Super Stocks: A New Assessment Of Ken Fisher's Pioneering Book

Super stocks table 1

 

If you had blindly invested in all ten stocks and held for the next three years, you would have earned 194%, compared to only 47% with the S&P 500. If, on the other hand, you had stuck only with the stocks with higher “Super Company” potential—Ophthotec, Perion, and Aviat—you would have earned 190%, which isn’t much different.

This, of course, doesn’t prove anything. It’s a sample of ten stocks out of about 3,000 that passed the screen over the last 22 years. Perhaps if I had the energy, time, and research tools to go through all 3,000 I would find that Fisher’s criteria actually made an appreciable difference. Or perhaps I’d find that they didn’t.

What Companies Pass the Screen Today?

The ten highest ranked stocks according to this system (square the price-to-sales ratio, multiply by the price-to-research ratio, and look for the lowest numbers) are—if we exclude companies that are under M&A conditions or have filed for bankruptcy—Tenneco (TEN), Weatherford (WFTLF), Power Solutions Intn’l (PSIX), L.S. Starrett (SCX), Goodyear (GT), Nissan (NSANY), Ion Geophysical (IO), Diebold Nixdorf (DBD), Ford (F), and Cooper-Standard (CPS). Interestingly, half of these companies are in the automobile industry. Are any of them “super stocks”? If we look at the first part of Fisher’s definition—stocks that increase 3 to 10 times in value in three to five years—I would guess that some of them will be. But if we look at the second part, which concerns “Super Companies,” I doubt it.

Conclusions

Last year I wrote about the value of the ratio of R&D to market cap, so it was a great pleasure for me to discover now that Ken Fisher had advocated using the same ratio back when I was an undergrad. Of the many books on investing I’ve read, Super Stocks is one of the more prescient. Fisher figured out how to beat the market by using innovative takes on value ratios, and his strategy has been working well ever since. I find that quite impressive. Joel Greenblatt’s 2005 Little Book that Beats the Market, like Super Stocks, offered a rather simple two-factor investing model; but that formula stopped working about five years after he published it. The formula Ken Fisher offers in Super Stocks has been working for over 35 years.

My CAGR since 1/1/2016: 45%.

My top ten holdings right now: TRIB, FKWL, AVNW, STRT, MTEX, NTWK, CPIX, ISDR, RNDB, DVD.

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