Investment Strategies

Quantitative strategies from legendary investors and influential books, with specific thresholds and metrics required to implement them.

Warren Buffett — Quality at a Fair Price

Buy wonderful companies at fair prices. Focus on durable competitive advantages (moats), consistent earnings, and shareholder-friendly management.

Metric	Threshold	Function
`ROE (5yr avg)`	`> 15%`	`__c.roe(read, sym)`
`ROIC`	`> 15%`	`__c.roic(read, sym)`
`Debt/Equity`	`< 0.5`	`__c.debtToEquity(read, sym)`
`Net Profit Margin`	`> 10%`	`__c.netMargin(read, sym)`
`Operating Margin`	`> 15%`	`__c.operatingMargin(read, sym)`
`Free Cash Flow`	`Positive and growing`	`__c.fcfGrowth(read, sym)`
`Earnings Growth`	`Consistent > 10% YoY`	`__c.earningsGrowth(read, sym)`
`P/E Ratio`	`Below industry avg or < 15`	`__c.peRatio(read, sym)`
`Quality of Earnings`	`OCF > Net Income`	`__c.qualityOfEarnings(read, sym) > 1`

Benjamin Graham — Deep Value

Buy stocks trading significantly below intrinsic value. The "margin of safety" protects against errors in analysis.

Metric	Threshold	Function
`P/E Ratio`	`< 15`	`__c.peRatio(read, sym)`
`P/B Ratio`	`< 1.5`	`__c.pbRatio(read, sym)`
`P/E × P/B`	`< 22.5 (Graham Number)`	`peRatio × pbRatio`
`Current Ratio`	`> 2.0`	`__c.currentRatio(read, sym)`
`Debt/Equity`	`< 1.0`	`__c.debtToEquity(read, sym)`
`Earnings Growth`	`Positive EPS last 10 years`	`historical check`
`Dividend`	`Uninterrupted 20+ years`	`dividend history`

Graham Number Formula

Graham Number = √(22.5 × EPS × Book Value per Share)
Buy when: price < Graham Number

Joel Greenblatt — Magic Formula

Rank stocks by quality (return on capital) and cheapness (earnings yield). Buy the top-ranked combination.

Metric	Calculation	Function
`Earnings Yield`	`EBIT / Enterprise Value`	`__c.earningsYield(read, sym)`
`Return on Capital`	`EBIT / (Net Fixed Assets + Working Capital)`	`__c.roce(read, sym)`

Rules: Rank all stocks by both metrics, combine ranks, buy top 20-30, hold 1 year. Exclude financials and utilities. Min market cap $100M.

Joseph Piotroski — F-Score

Among cheap stocks (low P/B), use 9 binary signals to separate improving companies from deteriorating ones. Score 0-9.

#	Condition	Score 1 if...
`1`	`ROA`	`ROA > 0 this year`
`2`	`Operating Cash Flow`	`OCF > 0 this year`
`3`	`ROA Change`	`ROA this year > ROA last year`
`4`	`Accruals`	`OCF > Net Income`
`5`	`Leverage`	`Long-term debt decreased YoY`
`6`	`Liquidity`	`Current ratio increased YoY`
`7`	`Dilution`	`No new shares issued`
`8`	`Gross Margin`	`Gross margin increased YoY`
`9`	`Asset Turnover`	`Asset turnover increased YoY`

Buy: F-Score ≥ 8 AND P/B < 1.5. Avoid: F-Score ≤ 2. Rebalance annually.

Peter Lynch — GARP

Find growth stocks reasonably priced relative to their growth rate. The PEG ratio is the key metric.

Metric	Threshold	Function
`PEG Ratio`	`< 1.0 (ideally < 0.5)`	`peRatio / (epsGrowth × 100)`
`Earnings Growth`	`15-30% annually`	`__c.earningsGrowth(read, sym)`
`Debt/Equity`	`< 0.33`	`__c.debtToEquity(read, sym)`
`P/E Ratio`	`< Earnings Growth Rate`	`__c.peRatio(read, sym)`
`Free Cash Flow`	`Positive`	`freeCashFlow > 0`

Fair Value = EPS × Growth Rate
Buy when: Price < Fair Value (PEG < 1)
Sell when: PEG > 1.5 or growth decelerating

William O'Neil — CAN SLIM

Combine fundamental strength with technical momentum. Buy leading stocks breaking out of proper bases.

Letter	Metric	Threshold
`C`	`Current quarterly EPS`	`Up ≥ 25% YoY`
`A`	`Annual earnings growth`	`Up ≥ 25% for 3-5 years`
`N`	`New product/high/management`	`Near 52-week high`
`S`	`Supply & demand`	`Low float, volume surge`
`L`	`Leader or laggard`	`RS Rating ≥ 80`
`I`	`Institutional sponsorship`	`Increasing ownership`
`M`	`Market direction`	`Uptrend confirmed`

Altman Z-Score — Bankruptcy Prediction

Z = 1.2×(Working Capital/Total Assets)
  + 1.4×(Retained Earnings/Total Assets)
  + 3.3×(EBIT/Total Assets)
  + 0.6×(Market Cap/Total Liabilities)
  + 1.0×(Revenue/Total Assets)

Z-Score	Zone	Meaning
`> 2.99`	`Safe`	`Low bankruptcy risk`
`1.81 - 2.99`	`Grey`	`Moderate risk`
`< 1.81`	`Distress`	`High bankruptcy risk`

Dogs of the Dow

Buy the 10 highest-yielding Dow Jones stocks annually. High yield often indicates temporary undervaluation.

Rules: On Jan 1, identify 10 DJIA stocks with highest dividend yield. Invest equal amounts. Hold 1 year. Rebalance.

Momentum / Trend Following

Metric	Threshold	Implementation
`12-month return`	`Top decile`	`price change over 252 bars`
`6-month return`	`Top quartile`	`price change over 126 bars`
`200-day SMA`	`Price above`	`__c.priceAboveSma(bar, 200)`
`50/200 cross`	`Golden cross`	`__c.smaCrossAbove(bar, prevBar, 50, 200)`

Mean Reversion (Short-term)

Metric	Threshold	Implementation
`RSI`	`< 30 (buy) / > 70 (sell)`	`__c.rsiBelow(bar, 14, 30)`
`Bollinger Band`	`Within 5% of lower band`	`__c.bbProximity(bar, 'lower', 5, 20, 2)`
`Distance from 50 SMA`	`> 2 std devs below`	`price vs SMA calculation`

Ray Dalio — All Weather / Risk Parity

Balance risk across economic environments rather than concentrating in equities.

Environment	Indicators	Assets
`Growth Rising`	`GDP accelerating, PMI > 50`	`Stocks, Commodities, Corporate Bonds`
`Growth Falling`	`GDP decelerating, unemployment rising`	`Long-term Treasuries, TIPS`
`Inflation Rising`	`CPI accelerating, commodities up`	`Commodities, TIPS, Gold`
`Inflation Falling`	`CPI decelerating`	`Stocks, Long-term Treasuries`

Tobias Carlisle — Acquirer's Multiple

Buy the cheapest stocks by enterprise value to operating earnings. Pure cheapness outperforms quality+cheapness.

Acquirer's Multiple = Enterprise Value / Operating Earnings
Operating Earnings = Revenue - COGS - SG&A

Metric	Threshold	Function
`EV/Operating Earnings`	`Bottom decile (< 4x)`	`__c.evToEbitda(read, sym)`
`Market Cap`	`> $100M`	`screener`

Mark Minervini — Trend Template (SEPA)

Only buy stocks in confirmed Stage 2 uptrends that meet strict technical criteria.

#	Condition	Implementation
`1`	`Price > 150-day SMA`	`__c.priceAboveSma(bar, 150)`
`2`	`Price > 200-day SMA`	`__c.priceAboveSma(bar, 200)`
`3`	`150-day SMA > 200-day SMA`	`sma(bar,150) > sma(bar,200)`
`4`	`200-day SMA trending up ≥ 1 month`	`SMA slope positive`
`5`	`50-day SMA > 150-day SMA > 200-day SMA`	`stacked SMAs`
`6`	`Price > 50-day SMA`	`__c.priceAboveSma(bar, 50)`
`7`	`Price ≥ 25% above 52-week low`	`price vs 252-bar low`
`8`	`Price within 25% of 52-week high`	`price vs 252-bar high`

Stan Weinstein — Stage Analysis

Stocks move through 4 stages. Only buy in Stage 2 (advancing), short in Stage 4 (declining).

Stage	Condition	Action
`1 (Basing)`	`Price oscillates around flat 30-week MA`	`Watch`
`2 (Advancing)`	`Price breaks above 30-week MA on volume, MA turns up`	`BUY`
`3 (Topping)`	`Price oscillates around flattening 30-week MA`	`SELL`
`4 (Declining)`	`Price below declining 30-week MA`	`Avoid/Short`

David Dreman — Contrarian Value

Buy out-of-favor stocks with strong fundamentals. Market overreacts to bad news.

Metric	Threshold	Function
`P/E Ratio`	`Bottom 20% of market`	`__c.peRatio(read, sym)`
`P/B Ratio`	`Bottom 20% of market`	`__c.pbRatio(read, sym)`
`Dividend Yield`	`Top 20% of market`	`__c.dividendYield(read, sym)`
`Payout Ratio`	`< 50%`	`__c.payoutRatio(read, sym)`
`Debt/Equity`	`< industry average`	`__c.debtToEquity(read, sym)`

Hold 2-3 years for mean reversion.

Martin Zweig — Growth + Momentum

Earnings acceleration is the #1 signal. Revenue must confirm earnings (both growing).

Metric	Threshold	Function
`Revenue Growth`	`Accelerating (this Q > last Q)`	`__c.revenueGrowth(read, sym)`
`EPS Growth`	`≥ 15% and accelerating`	`__c.epsGrowth(read, sym)`
`P/E Ratio`	`< 3× growth rate, not > 43`	`__c.peRatio(read, sym)`
`Debt/Equity`	`< industry median`	`__c.debtToEquity(read, sym)`

Dividend Aristocrats

Companies that have raised dividends for 25+ consecutive years have proven business models.

Metric	Threshold	Function
`Consecutive increases`	`≥ 25 years`	`dividend history`
`Dividend Yield`	`> 2%`	`__c.dividendYield(read, sym)`
`Payout Ratio`	`< 75%`	`__c.payoutRatio(read, sym)`
`Debt/Equity`	`< 1.0`	`__c.debtToEquity(read, sym)`
`FCF covers dividend`	`FCF > dividendsPaid`	`cash flow check`

Shareholder Yield Strategy

Total cash returned to shareholders (dividends + buybacks + debt paydown) is a better predictor than dividend yield alone.

Shareholder Yield = Dividend Yield + Buyback Yield + Debt Paydown Yield

Metric	Threshold	Function
`Shareholder Yield`	`Top quintile (> 8%)`	`__c.shareholderYield(read, sym)`
`Dividend Yield`	`> 0%`	`__c.dividendYield(read, sym)`
`Buyback Yield`	`Positive (shares decreasing)`	`__c.buybackRatio(read, sym)`
`Valuation`	`P/E < 20`	`__c.peRatio(read, sym)`

John Neff — Low P/E Contrarian

Buy unfashionable stocks with low P/E ratios, decent growth, and high dividend yields.

Total Return Ratio = (Earnings Growth + Dividend Yield) / P/E Ratio
Buy when: Total Return Ratio > 2

Metric	Threshold	Function
`P/E Ratio`	`Below market average`	`__c.peRatio(read, sym)`
`Earnings Growth`	`7-20%`	`__c.earningsGrowth(read, sym)`
`Dividend Yield`	`> 0%`	`__c.dividendYield(read, sym)`
`Revenue Growth`	`Positive`	`__c.revenueGrowth(read, sym)`

Philip Fisher — Growth Quality

Buy outstanding companies with superior management and hold for the very long term.

Metric	Threshold	Function
`Revenue Growth`	`> 10% annually for 5+ years`	`__c.revenueGrowth(read, sym)`
`Net Margin`	`Improving trend`	`__c.netMargin(read, sym)`
`Operating Margin`	`> 15%`	`__c.operatingMargin(read, sym)`
`ROE`	`> 15%`	`__c.roe(read, sym)`
`Debt/Equity`	`< 0.35`	`__c.debtToEquity(read, sym)`
`EPS Growth`	`> 15% sustained`	`__c.epsGrowth(read, sym)`

John Templeton — Maximum Pessimism

Buy at the point of maximum pessimism. Look globally for the cheapest markets.

Metric	Threshold	Function
`P/E Ratio`	`< 5 (extreme value)`	`__c.peRatio(read, sym)`
`P/B Ratio`	`< 1.0`	`__c.pbRatio(read, sym)`
`Price vs 52-week high`	`Down > 50%`	`price decline`
`Earnings`	`Still positive`	`netIncome > 0`
`Debt/Equity`	`< 1.0`	`__c.debtToEquity(read, sym)`

Diversify across 100+ positions globally. Hold 4-5 years for mean reversion.

Dual Momentum — Gary Antonacci

Combine relative momentum (which asset is strongest) with absolute momentum (is it positive at all) to avoid bear markets.

Step	Condition	Implementation
`1`	`Calculate 12-month return of each asset`	`price change over 252 bars`
`2`	`Relative: Pick asset with highest return`	`compare returns`
`3`	`Absolute: Is winner's return > T-bill rate?`	`return > treasury year1`
`4`	`If yes → invest in winner`	`buy signal`
`5`	`If no → move to bonds/cash`	`defensive`

Sector Rotation — Business Cycle

Different sectors outperform at different phases of the economic cycle.

Phase	Economic Signal	Favored Sectors
`Early Recovery`	`GDP accelerating, rates low`	`Technology, Industrials, Consumer Discretionary`
`Mid Cycle`	`GDP strong, rates rising`	`Technology, Industrials, Energy`
`Late Cycle`	`GDP slowing, inflation rising`	`Energy, Materials, Healthcare`
`Recession`	`GDP negative, rates falling`	`Utilities, Healthcare, Consumer Staples`

Pat Dorsey — Economic Moat Investing

Identify companies with sustainable competitive advantages (moats) and buy them at reasonable prices.

Moat Signal	Metric	Threshold
`Pricing Power`	`Gross Margin`	`> 40% stable for 10yr`
`Efficiency`	`ROIC`	`> 15% for 10yr`
`Scale`	`Operating Margin`	`> industry, expanding`
`Capital Light`	`Capex/Revenue`	`< 5%`
`Cash Generation`	`FCF Conversion`	`> 80% of earnings`

Only buy moat stocks when P/E < 20 or FCF Yield > 5%.

William Bernstein — The Four Pillars of Investing

Successful investing rests on four pillars: Theory (risk and return are related), History (markets are cyclical), Psychology (your worst enemy is yourself), and Business (Wall Street is not your friend). Use broad diversification, tilt toward value/small, keep costs low, and rebalance mechanically.

The Four Pillars

Pillar	Lesson	Application
`Theory`	`Higher risk = higher expected return`	`Tilt toward small cap & value for premium`
`History`	`Bubbles and crashes repeat`	`Don't chase performance, rebalance into fear`
`Psychology`	`Investors buy high, sell low`	`Use rules-based rebalancing, ignore emotions`
`Business`	`Fees destroy returns`	`Use index funds, minimize costs`

No-Brainer Portfolio

Allocation	Asset	ETF Example
`25%`	`US Large Cap Stocks`	`VTI / SPY`
`25%`	`US Small Cap Stocks`	`VB / IJR`
`25%`	`International Small Cap`	`VSS / SCZ`
`25%`	`Short-Term Treasuries`	`SHY / VGSH`

Four Pillars Medium (Value Tilt)

Allocation	Asset	ETF Example
`15%`	`US Large Cap`	`VTI`
`10%`	`US Large Value`	`VTV`
`10%`	`US Small Cap`	`VB`
`10%`	`US Small Value`	`VBR`
`5%`	`US REITs`	`VNQ`
`15%`	`International Large`	`VEA`
`10%`	`International Small`	`VSS`
`5%`	`Emerging Markets`	`VWO`
`20%`	`Short-Term Bonds`	`BSV`

Rebalancing Rules

Rule	Threshold	Implementation
`Calendar rebalance`	`Annually (Jan 1)`	`fixed schedule`
`Band rebalance`	`When allocation drifts > 5% from target`	`monitor drift`
`Contrarian rebalance`	`Sell winners, buy losers back to target`	`mechanical`

Value Tilt Signals

Signal	Condition	Source
`Value spread wide`	`Value P/E << Growth P/E`	`__c.peRatio(read, sym)`
`Small cap discount`	`Small cap P/E < Large cap P/E`	`compare metrics`
`Yield curve normal`	`10Y > 2Y (economy healthy)`	`treasury-rates`
`After crash`	`Market down > 30% from peak`	`price vs high`

Key Quantitative Principles

Principle	Rule
`Expected stock return`	`Dividend Yield + Earnings Growth + Valuation Change`
`Rebalancing bonus`	`Diversified assets with low correlation add ~0.5-1%/yr`
`Small cap premium`	`Small caps outperform large by ~2%/yr long-term`
`Value premium`	`Value outperforms growth by ~3%/yr long-term`
`Bonds allocation`	`Age in bonds (30yr old = 30% bonds) or fixed 25%`
`Never hold > 80% stocks`	`Even aggressive investors need ballast`

Macro Timing (Valuation-Informed)

Market Condition	Signal	Action
`Stocks cheap`	`CAPE < 15, dividend yield > 3%`	`Increase stock allocation by 10%`
`Stocks expensive`	`CAPE > 30, dividend yield < 1.5%`	`Decrease stock allocation by 10%`
`Normal`	`CAPE 15-30`	`Hold target allocation`
`Yield curve inverted`	`2Y > 10Y treasury`	`Reduce risk, increase bonds`