I noticed dimensional small cap value (DFSVX) and avantis small cap value (AVUV), (probably some of the top factor funds out there), tend to go heavy on stocks that are high on 3-year growth metrics and actually don't seem to care about the 1 year, PYQ, or PQ - in fact those tend to be negative on average for the companies they hold (sometimes < -20% on avg for some metrics). It makes sense in theory - buy good companies with a temporary decline in cash flow, earnings, and sales. Avantis for example, the average company in their fund has 20% of higher for each of these: @OCFPSGr%3Y, @FCFPSGr%3Y, @EPSExclXorGr%3Y
This is really the main major difference between my models and theirs it seems.
However, whenever I replace or add on any of those instead of PYQ growth metrics, my backtest performance over 20 years drops a few points, rather than goes up. This happens with testing 100 or 300 companies. Has anyone ever been successful using these growth metrics?
It seems to be working for Avantis and they have the highest 3-Y growth metrics and highest 5-year returns of any automated/"passive" small cap value fund i've seen.
I don't think I've seen any studies supporting long-term growth metrics, so I guess I shouldn't been too surprised. You guys seen any support for those?
(I downloaded their holdings then checked the averages for each metric using the screener)
