Stocks and Sectors

One of AAII (American Association of Individual Investors) more popular–and profitable–screens is the ‘O’Shaughnessy Tiny Titans’. Since 1998, the screen has produced cumulative results of over 2000%. However, since 2007 the screen has struggled significantly in down markets.

The screen looks for companies with a market cap between $25 million and $250 million, a price to sales of less than 1, excludes over the counter stocks, and finally, ranks the top 25 based on the greatest relative strength over the past 52 weeks. This creates a list of highly volatile and risky stocks.

However, there may be some names of interest worthy of further research. In addition, one potential strategy would be to pair the portfolio with a hedge by simultaneously shorting the Russell 2000 via RWM with a portion of your portfolio.

Or, an investor could only participate in the strategy when an index such as the Russell 2000 was above a long term moving average. My suggestion for using a moving average system was inspried in part by Mebane Faber’s The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets and also by Tom Lydon, author of The ETF Trend Following Playbook: Profiting from Trends in Bull or Bear Markets with Exchange Traded Funds.