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Analyzing Capital Gains Strategies in Industrial and Manufacturing Markets

This study evaluates the performance of capital gains strategies among approximately 8,500 industrial and manufacturing companies spanning from 1994 to 2001. Utilizing panel data and raw data sourced from Simplystocks, the analysis focuses on fiscal year gains from 3 to 15 months. The tests segment companies into winners and losers based on a split distribution, while examining Jegadeesh-Titman price momentum and cash economic return momentum strategies. Results highlight how intrinsic value impacts capital appreciation trajectories in varying market capitalization tiers.

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Analyzing Capital Gains Strategies in Industrial and Manufacturing Markets

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  1. BACK-TESTS(A WORK-IN-PROGRESS) By Rawley Thomas President LifeCycle Returns, Inc. Rawley@LCRT.com

  2. SAMPLE & METHODOGY • About 8,500 Industrial and Manufacturing Companies • 1994-2001 Panel Data • Raw Data Source: Simplystocks • Calculations: LifeCycle Returns, Inc. • Tests Run on Fiscal Year +3 to +15 Months Capital Gain or Appreciation • Distribution Divided into Winners and Losers Based on Screen Splitting Distribution in Half

  3. SCREENS • Jagedeesh-Titman Price Momentum – Fiscal Year -9 to +3 Months • Cash Economic Return Momentum – Fiscal Year -9 to +3 Months • Over/Under LCRT Life Cycle Intrinsic Value at Fiscal Year +3 Months

  4. TOTAL DISTRIBUTION

  5. JEGADEESH-TITMAN* PRICE MOMENTUM EFFECT *Narasimhan Jegadeesh and Sheridan Titman, “Profitability of Momentum Strategies: An Evaluation of Alternative Explanations,” Journal of Finance, April, 2001, pp. 699 ff.

  6. CASH ECONOMIC RETURN MOMENTUM

  7. OVER/UNDER LCRT LIFE CYCLE INTRINSIC VALUE AT FISCAL YEAR +3 MONTHS

  8. OVER/UNDER LCRT LIFE CYCLE INTRINSIC VALUE AT FISCAL YEAR +3 MONTHS – TOP AND BOTTOM DECILES

  9. OVER/UNDER LCRT LIFE CYCLE INTRINSIC VALUE AT FISCAL YEAR +3 MONTHS – MODEL TRACKING ERROR < 30%

  10. FULL DISTRIBUTIONS

  11. OVER/UNDER LCRT LIFE CYCLE INTRINSIC VALUE AT FISCAL YEAR +3 MONTHS – MARKET CAPITALIZATION > $1 BILLION

  12. OVER/UNDER LCRT LIFE CYCLE INTRINSIC VALUE AT FISCAL YEAR +3 MONTHS – MARKET CAPITALIZATION > $1 BILLION AND MODEL TRACKING ERROR < 60%

  13. COMBINING PRICE MOMENTUM AND OVER/UNDER INTRINSIC VALUATION

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