Kenneth L. Fisher

Kenneth L. Fisher

The Price-to Sales strategy is the brainchild of Kenneth Fisher (Ken Fisher), the son of legendary investor Philip A. Fisher. The Economics graduate from Humboldt State University has published 10 books, including four New York Times bestsellers. In 1979, he founded Fisher Investments where he is still the CEO and Co-Chief Investment Officer. Many may know him best for his Portfolio Strategy column in Forbes, for which he has written for more than 30 years.

Summary

Ken Fisher is the father of the Price-to-Sales strategy. This investing strategy ties price to expectations of a company’s growth, profitability and risk, which are determining factors in the sale price of a company, in contrast to price-to-book-value and price-to-earnings ratios. In general, the higher the expected growth, the higher the price-to-sales ratio the stock can support. This strategy should not be applied to financial firms such as banks, because sales are not a driving force for them.

Success Formula Price-to-Sales

Excluded: Financial firms

  1. MktCapM is >= US$ 600 million (basis year 2000) adjusted yearly
  2. Latest filing P/S ratio for
    1. Cyclical stocks is <= 0.8
    2. Defensive stocks is <= 3
  3. Latest filing Debt to Equity ratio is <= 40
  4. For companies which depend on research (technology, medical, etc.): Current MktCapM / TTM R&D expenditures is <= 15
  5. Average 5 FY EPS growth % is > 15%
  6. TTM Free Cash Flow per share is > 0
  7. 3y average Pre-tax profit margin % is >= 5%

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

Books

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