Glossary

A stock's return over the past 12 months, skipping the most recent month. Skipping the last month avoids short-term reversals. Momentum Top 15 ranks stocks on this.

Return above what the market (here, SPY) delivered over the same period.

Compound annual growth rate: the steady yearly return that would turn the starting value into the ending value.

A simulation of how a set of rules would have done on past data. Hypothetical: no real money was invested, and it can't account for everything that happens in real trading.

One hundredth of a percent. 10 bps = 0.10%. Our backtests charge 10 bps per trade to stand in for trading costs.

How much a stock tends to move with the market. Beta 1.5 means it has typically moved about 1.5% for every 1% move in the S&P 500.

The fall from a previous peak to a later low. Max drawdown is the worst such fall in the period.

A company's profit divided by its number of shares.

When reported EPS comes in above (beat) or below (miss) the average analyst estimate.

Every holding gets the same share of the portfolio, e.g. 15 stocks at about 6.7% each.

A quarterly SEC report of the US stock holdings of large investment managers. It arrives up to 45 days after quarter-end, so copy portfolios lag.

Free cash flow divided by market value. Higher means you pay less for each dollar of cash the business produces.

The SEC filing company insiders (officers, directors, 10% owners) must file within two business days of buying or selling their company's stock.

Price divided by analysts' expected earnings over the next 12 months.

Cash from operations minus capital spending: the cash a business generates that it could return to shareholders.

The Global Industry Classification Standard's 11 sectors (Information Technology, Health Care, Financials, etc.) used to group stocks.

The period used to design and tune a model. Results here tend to look better than reality.

Open-market purchases of a company's stock by its own executives or directors. Clusters of buying are often read as a confidence signal.

Returns of picks that were frozen and timestamped when the signal was made, measured only from the next close. Unlike a backtest, it can't be adjusted after the fact.

Share price times shares outstanding: what the stock market says the whole company is worth.

For cyclical businesses (chips and memory, energy, materials, chemicals, autos, airlines, homebuilders) one year's cash flow can sit far above or below normal. Mid-cycle cash flow uses the average free-cash-flow margin over many years (up to 10) times today's revenue, so a valuation isn't built on a peak or a trough.

A fixed set of rules that ranks stocks and picks a portfolio, applied the same way every rebalance.

Return since the last close of the previous month.

A period the model was NOT tuned on (here Jan 2022 onward). The more honest test of whether rules work.

Price divided by earnings per share. How many dollars you pay for each dollar of annual profit.

A 0-9 checklist of profitability, balance-sheet and efficiency improvements. 7-9 is strong, 0-3 weak.

Resetting a portfolio to the model's current picks and weights, monthly or weekly depending on the model.

Net income divided by shareholders' equity: how much profit a company makes with the money owners have put in.

A discounted cash flow model run backwards: start from today's share price and solve for the free-cash-flow growth rate that would justify it. It shows what the market is assuming, so you can judge whether that's realistic. It is context, not a buy or sell signal.

A tool that filters a large list of stocks down to those meeting your criteria.

Return per unit of volatility. Higher means a smoother ride for the return you got.

The SPDR S&P 500 ETF, a fund that tracks the S&P 500. Our benchmark for every model.

Whether SPY's month-end close is above or below its 10-month average, a common long-term trend gauge.

Backtesting on today's index members ignores companies that were dropped or went bust, which makes results look better than they would have been. Our backtests reduce it by counting a stock only while it was actually in the index.

How much of the portfolio is traded at each rebalance. Higher turnover means more trading costs and taxes.

Discounted cash flow: estimating what a business is worth today from the cash it's expected to produce in the future.

How much returns swing around, measured as the annualized standard deviation of returns.

Your private list of stocks. Coteau alerts you when news, research, insider trades, earnings or model changes hit them.