These
tables were not included in the first edition of REFS. They
have been added as a result of James O’Shaughnessy’s
research for his book, What Works on Wall Street. He found
that during the period 1954-1994 high one-year relative
strength was the most important single criterion with an
annual return of 18.14% compound against the market average
of 12.45%. Conversely, low one-year relative strength showed
the poorest return of all of only 1.78%.
I now regard positive relative strength over the previous
twelve months as a mandatory criterion for growth stocks.
I like it to be in excess of the one-month relative strength
and, if not, at least in excess of the three-month relative
strength. Great growth shares often pause for breath, but
prolonged lack of relative strength can be an indication
of something more serious.
The other columns in the tables show the prospective PER,
the EPS growth rate, the PSR, net gearing and the prospective
dividend yield. They give a broad idea of the fundamentals.
Other pertinent columns are shown in the market statistics.
In particular, twelve-month highs and lows are always of
interest in relation to the current price.
Any share of particular appeal should, of course, be double-checked
in detail with the company entry.
