Many research has been done on how low P/E stocks consistently outperform the market over the long run.
For instance, Roger Ibbotson, in his Decile Portfolios of the New York Stock Exchange, 1967 – 1984 Working paper, sorted all stocks according to the Price/Earnings ratios into deciles. He then tracked the returns of each decile over an 18-year period.
What he found out was that the lowest P/E decile returned 14.08% on average annually as compared to the NYSE which returned 8.6%. The highest P/E decile returned 5.58% instead.
Coming up with the lowest decile of P/E stocks in the STI
I worked with the free stock screener by SGXcafe
. Frankly, for something which cost zero, the functionalities are very good. All I did was to put in two variables: P/E > 0, and last close > 0. This is to remove companies with negative earnings and …