"The higher risk of the high P/Es, price-to-book, price-to-cashflow, and PSRs went uncompensated. Indeed, each of the strategies significantly underperformed the All Stocks Universe."
"I'd be a bum on the street with a tin cup if the markets were always efficient."
"Between January 1, 1997 and March 31, 2000, the 50 stocks from the All Stocks universe with the highest P/E ratios compounded at 46.69% per year, turning $10,000 into $34,735 in three years and three months. Other speculative names did equally as well, with the 50 stocks from All Stocks with the highest price-to-book ratios growing a $10,000 investment into $33,248, a compound return of 44.72%."All the highest valuation stocks trounced All Stocks over that brief period, leaving those focusing on the shorter term to think that maybe it really was different this time. But anyone familiar with past market bubbles knows that ultimately, the laws of economics reassert their grip on market activity. Investors back in 2000 would have done well to remember Horace's Ars Poetica, in which he states: 'Many shall be restored that are now fallen, and many shall fall that are now in honour.'"For fall they did, and they fell hard. A near-sighted investor entering the market at its peak in March of 2000 would face true devastation. A $10,000 investment in the 50 stocks with the highest price-to-sales ratios from the All Stocks universe would have been worth a mere $526 at the end of March 2003."You must always consider risk before investing in strategies that buy stocks significantly different from the market. Remember that high risk does not always mean high reward. All the higher-risk strategies are eventually dashed on the rocks."