WTSAO about stocks trading 6

I was doing some research last night analyzing the different strategies on AAII and seeing how they compare against the total market index.

From 1998-2010:
Buying everything in the market would return a total of 230% over that period. (Basically buying the VTI ETF).

(largest drawdown -46.3% in 2008, max monthly gain 23.9%,
max monthly loss: -22.1%)

Only the S&P MidCap 400 outperformed it with a 268%
(largest drawdown: -36.9% in 2008, max monthly gain 19%,
max monthly loss: -22.2%)

The S&P 500 and NASDAQ 100 didn't even come close to these returns.

I wanted to find out which strategy would outperform both while taking into account monthly volatility and yearly drawdown. First I ruled out any strategy that returned losses 2 years in a row and then filtered out only the ones that actually outperformed both. (There is no point following a strategy if it can't even beat a buy and hold strategy). This reduced the number of candidates strategies from 53 to 20.

Not every strategy is going to do well each year so I tried combining 2 strategies together to improve the overall result. I also used the Fairholme fund (FAIRX) as a benchmark since I think one of the best funds out there in terms of risk and reward.

I was expecting the result to be O'Neils CANSLIM strategy with another value based strategy but was somewhat surprised. The best combination turned out to be

Value on the Move (PEG w/Est Growth) + Est Rev Up +5% strategy.

The combination returned double digit returns 12 out of 13 years from 1998-2010 YTD with a 2008 drawdown of (-27.8%) outperforming the indices and the Fairholme fund. The monthly max gain was 22.3% and max loss (-22.4%). Total return: 1746%

A more conservative strategy combined the Est Rev Up+5 with the P/E Relative strategy with a better drawdown. 11 out of 13 years with double digit returns and a 2008 drawdown of (-17.1%). Monthly max gain 22.8, max monthly loss (-20%). Total return: 1616%

The Graham Defensive Investor (Non-Utility) + Est Rev Up +5% was somewhere in between in terms of performance but with superior drawdowns. 10 out of 13 years with double digit returns and a 2008 drawdown of (-25.2%). Monthly max gain 28.3%, max monthly loss (-19.5). Total return: 1626%. (This one had a lower monthly and yearly drawdown than even Buffet's strategy which returned 421% over the same period (-25.8% drawdown 2008); actually buying on relative P/E would have beat Buffet's strategy with a -15% drop in 2008 and a 636% return).

I'm not recommending anything. Just something interesting to check out.