// STUDY RESULT · 1998-01 TO 2026-09

Low Price-Earnings Portfolios

TRADE-OFF

Rank 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.

How this run differs from the source: The 30 lowest P/E names re-formed monthly, against Basu's yearly quintiles of NYSE industrials.

	THE STRATEGY	$SPXTR BUY & HOLD
CAGR	15.8%	9.3%
Sharpe ratio	0.75	0.66
Max drawdown	-63.3%	-50.9%

// GROWTH OF $1, LOG SCALE

AMBER: THE STRATEGY · GREY: $SPXTR BUY & HOLD

Out-of-sample (from the split): CAGR 12.9% against 14.0% for the benchmark; Sharpe 0.81 in-sample, 0.65 out-of-sample.

After 25 bps of trading costs: 14.6% a year. WITHIN RANDOM

// DECADE BY DECADE

ERA	STRATEGY	BENCHMARK
1990s	5.4%	20.9%
2000s	19.0%	-0.8%
2010s	14.2%	14.0%
2020s	16.8%	15.2%

// YEAR BY YEAR, LOSING YEARS IN RED

1998*-1.0%27.2%

199920.4%21.0%

200025.2%-9.1%

200142.2%-11.9%

2002-0.6%-22.1%

200367.4%28.7%

200431.0%10.9%

200515.8%4.9%

200626.3%15.8%

20070.8%5.5%

2008-40.6%-37.0%

200959.4%26.5%

201041.2%15.1%

2011-14.3%2.1%

201214.9%16.0%

201359.8%32.4%

201416.9%13.7%

2015-4.7%1.4%

201633.3%12.0%

201737.6%21.8%

2018-17.2%-4.4%

201911.4%31.5%

2020-4.7%18.4%

202137.7%28.7%

2022-10.8%-18.1%

202326.8%26.3%

202431.3%25.0%

202529.2%17.9%

2026*0.5%11.8%

Losing years: 1998 (-1.0%), 2002 (-0.6%), 2008 (-40.6%), 2011 (-14.3%), 2015 (-4.7%), 2018 (-17.2%), 2020 (-4.7%), 2022 (-10.8%). Each cell: the strategy, then the benchmark below it. * a part year.

// 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

RUN IT YOURSELF ▸ IN THE LIBRARY

A real computation on the QuantGPT warehouse, walk-forward. A study across the whole market includes only part of the companies that later delisted from 1998 (survivors only before); a study on your own list of tickers is not affected. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-11-08 16:56 ON THE QUANTGPT WAREHOUSE. COMPANIES THAT LATER DELISTED ARE ONLY PARTLY IN THIS UNIVERSE (A FIX IS IN PROGRESS), SO THE RESULT LEANS TOWARD SURVIVORS. FUNDAMENTALS BY FILING DATE. NOT INVESTMENT ADVICE. PRIVACY