How about back testing data, then writing a best selling book about it. Yes, we know that value stocks win out in the end, but if any investor really had the magic formula, we would imagine that logically they would have it more locked down than the Colonel's Secret Recipe or the original formula for Coke.
The title is a play on Jim O'Shaughnessy's What Works on Wall Street. Jim back tested over 50 years of data and determined that investors should buy low price-to-sales value stocks with strong RSI (Relative Strength). Value was also denoted by low price-to-book and low price-to-earnings ratios. We are not picking on Jim. We are merely using him as an example.
http://www.amazon.com/What-Works-Street-James-OShaughnessy/dp/0071452257/ref=sr_1_1?ie=UTF8&qid=1226359089&sr=8-1
Lady Market is a tough Mistress. what she giveth, she taketh away. There is no magic formula that works year in and year out in all markets. The market is a living, breathing, organism. She does not care what past backtests tell us . . . but Jim's investors might.
Ouch . . . we doubt many are looking forward to the October numbers.
http://www.osam.com/pdf/osam_monthly_performance.pdf
Though we will note that his long-term numbers are certainly better than most of his competitors. Additionally, after watching him on Bloomberg, Jim strikes us as a downright decent guy.
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