Top Piotroski-Graham Long-Term Value Stocks: Mid-Year 2020 Selections

These selections continue as ongoing tests and active portfolios for members looking for value stocks using one of the best fundamental value models in financial literature with enhancements.

Piotroski Value Portfolio YTD Returns

The ten July 2020 selections comprise the 19th portfolio since 2017 formed to test the one-year buy/hold portfolios of the Joseph Piotroski value algorithm that remains one of the best-performing value-based selection models in peer-reviewed financial research. The portfolios are now released 2 times per year with the last article: Top Piotroski-Graham Value Stocks For January 2020.

“The benefits to financial statement analysis are concentrated in small and medium-sized firms, companies with low share turnover, and firms with no analyst following, yet this superior performance is not dependent on purchasing firms with low share prices. A positive relationship between the sign of the initial historical information and both future firm performance and subsequent quarterly earnings announcement reactions suggests that the market initially underreacts to the historical information.” ~ Joseph Piotroski

Retests of the Piotroski model continue to outperform all other top value algorithm models as recently shown in peer-reviewed financial literature, according to Amor-Tapia, B. & Tascón, M.T. (2016). The selections offered here have been improved to include the Benjamin Graham enhancements and additional parameters described in the methods section below.

The one-year buy/hold portfolio from last year’s July 2019 Piotroski-Graham selections has returned -32.2% compared to the S&P 500 +6.40% over the same period. The January 2020 value selections are down -33.48% YTD and include many stocks from the slowest sectors to recover from the February/March COVID correction.

No technology or healthcare stocks qualified in any of the recent value portfolio models and those sectors have been among the best sectors over the past year. The high representation of homebuilder companies may also make the Direxion Daily Homebuilders & Supplies Bull 3x Shares ETF (NAIL) or the SPDR Homebuilders ETF (XHB) a strong choice for the coming year. Additionally, Oil & Gas Midstream stocks may indicate good value in ClearBridge Energy MLP Fund (CEM) or Kayne Anderson Midstream/Energy Fund (KMF) for long-term growth.

July 2020: Piotroski/Graham Value Enhanced Selections

These new selections for July have the highest Piotroski F-Scores of all the stocks screened across the US markets with a share price above $3 and average daily volume over 100k shares. In addition, the Benjamin Graham enhancements have been applied on the basis that these characteristics are well documented to deliver excess annual market returns. More information on the Graham Number formula can be found at the end of the article.

The following four sample stocks reflect the best Piotroski stocks with the highest Piotroski F-Scores and meet the qualifying price/Graham number values less than 1. According to historical long-term results, these stocks have very high investment value from oversold levels that should deliver strong long-term gains. Additionally, none of these stocks had any red-flags from the Beneish M-Score forensic algorithm that checks for earnings manipulation or financial irregularities:


The majority of the stocks come from either the Industrial Goods or the Consumer Goods sectors that have been hard hit in the first part of the year. These selections are based on the academic value algorithms documented in the modeling section at the end of this article and my own preset modeling enhancements of minimum trading volume and price. Value selections are intended for a one-year buy/hold methodology of highly undervalued fundamental characteristics.

The Allstate Corp. (ALL)




The Allstate Corporation, through its subsidiaries, provides property and casualty, and other insurance products in the United States and Canada. The company operates through Allstate Protection, Service Businesses, Allstate Life, and Allstate Benefits segments. The Allstate Protection segment offers private passenger auto and homeowners insurance; specialty auto products, including motorcycle, trailer, motor home, and off-road vehicle insurance; other personal lines products, such as renter, condominium, landlord, boat, umbrella, and manufactured home and stand-alone scheduled personal property; liability insurance products; and commercial lines products under the Allstate, Esurance, and Encompass brand names.

Lennar Corporation B stock (LEN.B)




Lennar Corporation, together with its subsidiaries, operates as a homebuilder primarily under the Lennar brand in the United States. It operates through Homebuilding East, Homebuilding Central, Homebuilding Texas, Homebuilding West, Financial Services, Multifamily, and Lennar Other segments. The company’s homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development, and sale of residential land.

Meritage Homes Corp. (MTH)




Meritage Homes Corporation designs and builds single-family homes in the United States. The company operates through two segments, Homebuilding and Financial Services. It acquires and develops land; and constructs, markets, and sells homes for first-time and first move-up buyers.

Toyota Motor Corp. (TM)




Toyota Motor Corporation designs, manufactures, assembles, and sells passenger vehicles, minivans and commercial vehicles, and related parts and accessories. It operates in Automotive, Financial Services, and All Other segments. The company offers hybrid cars under the Prius, Prius PHV, C-HR, LC HV, LS HV, Camry, JPN TAXI, Avalon, Crown, Century HV, UX HV, Corolla SD, Corolla Sport, and WG HV names; fuel cell vehicles under the MIRAI and SORA names; and conventional engine vehicles, including subcompact and compact cars under the Yaris, Aqua, Passo, Roomy, Tank, Etios, Vios, AGYA, Rush, GLANZA, and Raize names.

Introduction to Piotroski F-Score Methodology

This article continues the series of testing the best value investment research over a one-year time horizon for well-documented and substantial value-investing returns. This study is testing the Piotroski F-score model to see how many of the different value portfolios formed each month can outperform the market over a year-long period.

These Piotroski value selections are designed as a more stable, long-term investment approach to identify highly oversold stocks, in contrast to the Weekly Breakout Forecast based on highly volatile, short-term momentum stocks. The value selection formulas have been well-documented in the financial literature over the past 17 years to consistently outperform benchmark indexes.

  • The Piotroski stock selections above build on the findings from the Amor-Tapia & Tascon (2016) research that evaluates top selection models in more detail in the initial August report that found the Piotroski model to be one of the best models tested for value investment selections.
  • The American Association of Individual Investors also documents their own multi-year test results of the Piotroski F-score as one of the best-performing models with 17-year annualized total returns of 13.7%.
  • These Enhanced Piotroski portfolios using Graham parameters and my additional liquidity price/volume limits consistently outperform the AAII Benchmark Piotroski portfolios, down -41.8% in 2020, -19.1% in 2019, and -36.1% in 2018.

The values and methodologies from Joseph Piotroski and Benjamin Graham were devised for long-term value approaches that differ significantly from growth or momentum strategies. Like many models, they can cycle in/out of favor as economic conditions and markets change. The benefit of the inclusion of the different types of models that I offer is to identify when these larger cycles begin to shift and readers can reap significant gains from changing models. Additionally, there has been no other value strategy yet tested in the financial literature that has beaten the Piotroski approach in all the peer-reviewed studies over competitive 1-year tests.

Cycles can shift dramatically and this is another important component in my recent article: Value Picks Crush Momentum In First Major Reversal Since 2009: What’s Next

In a separate process, all the prior value stock picks from these Piotroski-Graham portfolios are applied to proprietary momentum algorithms on a daily/weekly database to track and identify the best purchase timing for members of my service. This live update page also serves as a trend tracker to see when different value, growth, MDA breakout, B/L Momentum, and Forensic picks are outperforming. A sample of the Daily Top stocks in breakout conditions across all portfolio types is shown below:

Background on Value Scoring Systems

Calculating scores and assigning values to stocks based on fundamental data remain one of the most popular methods for value stock investing. Most of us are familiar with such scoring systems as the Value Line Rank (started in 1965), the CANSLIM composite ranking system (started in 1988), the Zacks Rank (started in 1982, first made public in 1992), and many other popular systems that have given us good results over the years. To this day, it is not uncommon to find substantial overlap among the best stocks identified by different value ranking methodologies. Most medium- to long-term investors are well served by taking these models into consideration.

Less well-known are the academic composite value models based on fundamentals that continue to be rigorously tested in peer-reviewed financial literature. Some of these published models have their measurement scoring integrated into publicly available stock screens from various stock analysis websites. One of the best academic models retested recently by Amor-Tapia and Tascon (2016) is the Piotroski score model created by Joseph Piotroski in 2000:

The Piotroski (2000) F-Score: The Score consists of aggregating nine individual binary signals derived from accounting variables related to profitability. The most favorable value score is 9 and the least favorable is zero.

(Amor-Tapia &Tascon, 2016)

The Graham Number: Benjamin Graham, often called “the Father of Value Investing,” first leveraged key financial ratios to identify undervalued companies with strong growth potential. The Graham Number value score results from a formula developed by Benjamin Graham that is based on his assessment that good value stocks should have a P/E ratio below 15 and a P/B ratio below 1.5:

This Graham Number value equals the square root of 22.5 x EPS x P/B. Because it leaves out many other important characteristics, it is better applied as an enhancement to the highly successful Piotroski F-Score value selection model.


The Piotroski F-Score model has been well-documented in financial literature and by practitioners to generate significant abnormal returns on an annual basis. This value model remains one of the top selection models among dozens also tracked by the American Association of Individual Investors.

First, value stocks tend to be neglected. As a group, these companies are thinly followed by the analyst community and are plagued by low levels of investor interest. Given this lack of coverage, analyst forecasts and stock recommendations are unavailable for these firms. Second, these firms have limited access to most “informal” information dissemination channels and their voluntary disclosures may not be viewed as credible given their poor recent performance. Therefore, financial statements represent the most reliable and most accessible source of information about these firms. Third, high BM firms tend to be “financially distressed”; as a result, the valuation of these firms focuses on accounting fundamentals such as leverage, liquidity, profitability trends, and cash flow adequacy. These fundamental characteristics are most readily obtained from historical financial statements.” ~ Joseph Piotroski

Since my testing began of this Enhanced Piotroski-Graham model, it has consistently outperformed the benchmark AAII Piotroski selection model every year. However, the long-term value selections have been lagging momentum models and especially selections that include technology, healthcare, or the top FANG+ Index stocks that account for a majority of market gains this year. These enhanced value model selections above also eliminate financial outliers and low-priced stocks that may jeopardize the best performance results possible.

I trust this will be a profitable contribution to your investment objectives in 2020!

JD Henning, PhD, MBA, CFE, CAMS


Amor-Tapia, B. & Tascón, M.T. (2016). Separating winners from losers: Composite indicators based on fundamentals in the European context *. Finance a Uver,66(1), 70-94.

Piotroski, J. D. (2000). Value investing: The use of historical financial statement information to separate winners from losers. Journal of Accounting Research, 38, 1-41.

Graham, B. (1949). The Intelligent Investor: The Definitive Book on Value Investing.

If you are looking for a great community to apply proven financial models with picks ranging from short term breakouts to long term value and forensic selections, please consider joining our 800+ outstanding members at Value & Momentum Breakouts

Disclosure: I am/we are long NAIL, SOXL, NUGT, FNGU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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