The AAII screens are an educational resource for our members, designed to expose you to a wide range of stock investment approaches, as well as the individual companies that pass each investment screen month-to-month. We report the performance of hypothetical portfolios of the stocks passing the individual screens for comparison to illustrate how various stock selection strategies perform over differing market conditions. We do not intend this to be an enticement to invest based on any one methodology nor is this an endorsement of any specific investment approach.

Each month, over 50 separate screens are performed using AAII’s Stock Investor Pro software. Strategies run the gamut from “pure” value- and growth-based approaches, small-cap to large-cap, to some specialty methodologies, and many that fall in between.

How We Calculate Returns

The performance of the stocks held in hypothetical portfolios for each screen are tracked on a monthly basis. At the end of each month, we run each screen and the companies passing each screen are “purchased” in equal dollar amounts using the month-end price. We assume that we hold these stocks for one month, “selling” all the stocks at next month’s closing price. The performance of a portfolio for that month is the average percentage change from month-end close to month-end close. These monthly performance figures are used to generate the cumulative gain for a screen. We then run the screen with the new month-end data and repeat the process all over again, investing all proceeds. Sell rules are the same as buy rules. Thus, a stock is “sold” (no longer included in the portfolio) if it ceases to meet the initial criteria, and new stocks are added if they qualify. Stocks that no longer qualify are dropped even if the strategist behind a particular approach suggests different sell rules versus buy rules.

Keep in mind that the impact of factors such as commissions, bid-ask spreads, and time slippage (time between the initial decision to buy a stock and the actual purchase) are not considered. This overstates the reported performance, but all approaches are subject to the same conditions and procedures. Higher turnover portfolios would typically benefit more from these simplified rules.

The only time a given approach is “in cash” (not invested in any stocks) is when no companies pass the screen in a given month.