Do the rules in the Guru Screens ever change?
We try to keep the guru screen rules constant, in order to maintain the validity of the performance tracking. However, there have been a couple of key changes to the Guru Screens since inception as follows:
- Bill Miller Contrarian Value - Initially, this screen was extremely strict, requiring a Price to Free Cash Flow < 3x. However, as there were no qualifying candidates for a long period, we changed this to a relative P/FCF rank namely, P/FCF Rank above 80%, i.e. the Price to Free Cash Flow must be in the top 20% cheapest in the market. This was done after the June 2014 rebalancing date.
- Peter Lynch Growth Screen - The criteria that this screen initially used were too strict, and the number of qualifying stocks was too small. We initially required a PEG (5yr growth) below 1. We changed this to a PEG below 1. Furthermore, the model initially screened for companies with a P/E ratio below 10. We changed this to a P/E ratio that was below the market average.