// STUDY RESULT · 1993-10 TO 2026-07
Low Price-Earnings Portfolios
TRADE-OFFRank stocks by price relative to reported earnings and favor the lowest P/E group. This is a direct earnings-yield value screen rather than a forecast of earnings growth.
| THE STRATEGY | $SPX BUY & HOLD | |
|---|---|---|
| Growth a year (CAGR) | 11.8% | 8.9% |
| Return per unit of risk (Sharpe) | 0.64 | 0.65 |
| Worst fall (max drawdown) | -65.1% | -52.6% |
// GROWTH OF $1, LOG SCALE
AMBER: THE STRATEGY · GREY: $SPX BUY & HOLD
Tested on years it never saw (from the split): 12.5% a year against 12.4% for the benchmark; Sharpe 0.64 in the training years, 0.64 after.
After 25 bps of trading costs: 10.7% a year. WITHIN RANDOM
// DECADE BY DECADE
| ERA | STRATEGY | BENCHMARK |
|---|---|---|
| 1990s | 9.4% | 19.1% |
| 2000s | 11.9% | -2.6% |
| 2010s | 10.3% | 11.6% |
| 2020s | 16.7% | 14.1% |
// THE IDEA, AS PUBLISHED
Sanjay Basu (1977), Journal of Finance · 1977
- NYSE industrials with December fiscal years; P/E = year-end price / annual EPS
- Sort into P/E quintiles each April 1 (3-month reporting lag)
- Buy the lowest-P/E quintile, hold 12 months, re-form yearly
A real computation on the QuantGPT warehouse, survivorship-free, walk-forward. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-09-24 19:41 ON THE QUANTGPT WAREHOUSE: EVERY DELISTED NAME KEPT, FUNDAMENTALS AS FILED. NOT INVESTMENT ADVICE.