Some of the biggest winners on a total return basis were companies that had been acquired. Examples include Sun America, Warner Lambert, Gillette, Golden West Financial and Harrah’s Entertainment. However, most (68%) are still trading today. Not surprisingly, they are almost exclusively large cap companies. However, further research suggests that they weren’t large companies when they were enjoying the bulk of their cumulative returns. Becoming a large cap is simply the natural result of significant price appreciation above and beyond that of the other stocks in the market. We were not able to detect any sector tendencies. The biggest winners on a total return basis were simply the minority that outperformed their peers.
Both the biggest winners on annualized return and total return basis tended to have one thing in common while they were accumulating market beating gains. Relative to average stocks they spent a disproportionate amount of time making new multi-year highs. Stock ABC can’t typically travel from $20 to $300 without first crossing $30 and $40. A stock that’s going from $20 to $300 is likely going to spend a lot of time making new highs. Likewise, the worst performing stocks tended to spend zero time making new multi-year highs while they were accumulating losses. Rather, relative to average stocks they tended to spend a disproportionate amount of time at multi‐year lows.
Mathematically it makes perfect sense. Stocks that generate thousands of percent returns will hit new highs hundreds of times, usually over the course of many years.
Could it be this simple; long term trend following on stocks? That’s our conclusion. For detailed results of the trading system that was inspired by this research see the paper, “Does trend following work on stocks?”
Same logic can be applied for new lows. Now on to the list, compare these with the list I posted yesterday :
AAPL: CLOSE=82.33, 52WEEKLOW=80.49
ADBE: CLOSE=21.06, 52WEEKLOW=20.44
BAC: CLOSE=7.18, 52WEEKLOW=7.18
BCS: CLOSE=7.25, 52WEEKLOW=7.25
BNI: CLOSE=63.66, 52WEEKLOW=63.36
COF: CLOSE=24.1, 52WEEKLOW=24.1
CSX: CLOSE=29.83, 52WEEKLOW=29.83
DO: CLOSE=57.97, 52WEEKLOW=55.45
DVN: CLOSE=58.68, 52WEEKLOW=58.17
HBC: CLOSE=39.95, 52WEEKLOW=39.95
JPM: CLOSE=22.82, 52WEEKLOW=22.72
KEY: CLOSE=6.31, 52WEEKLOW=6.22
KSU: CLOSE=17.79, 52WEEKLOW=16.59
MTB: CLOSE=39.93, 52WEEKLOW=39.93
NE: CLOSE=21.61, 52WEEKLOW=20.11
NSC: CLOSE=37.81, 52WEEKLOW=37.81
PDS: CLOSE=6.25, 52WEEKLOW=6.11
SINA: CLOSE=21.51, 52WEEKLOW=20.33
SLB: CLOSE=39.9, 52WEEKLOW=37.7
UNG: CLOSE=19.8301, 52WEEKLOW=19.8301
UNP: CLOSE=40.42, 52WEEKLOW=40.42
USO: CLOSE=29.86, 52WEEKLOW=27.78
WFC: CLOSE=18.68, 52WEEKLOW=18.68
XLF: CLOSE=9.68, 52WEEKLOW=9.39
