Spinning Gold Into Straw

I have spent a lot of time recently on the ideas of Robert Novy-Marx, the University of Rochester professor who has advanced some theories on combining profitability with value characteristics in an effort to find stocks that can outperform the markets. He has some interesting ideas, and I find in testing and twisting his ideas that they work -- and are now in my tool box.

When you use a ratio of gross profit to assets, you can spot companies for which the market does not clearly see the potential for large profits. If you then apply classic value characteristics to the analysis, you filter out stocks that can provide huge returns. This constitutes some of the more groundbreaking equity market research of the past couple of decades, in my opinion....628 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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