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Does Most Expensive 100 by P/E (hot growth) actually work?

DEAD

No edge left once tested on a fair footing.

The claim

Hold the 100 highest-P/E stocks, equal-weight — Story-stock / 'disruption' chasers

What we did

Tested against Cap-weight SPY, buy & hold, 2017-2026, 100-stock equal-weight, annual rebalance, survivorship-free.

The result

Result: 10.3 %/yr CAGR (cap-weight = +12.5)

+10.3%/yr CAGR, Sharpe 0.54, maxDD -41% (2017-21 +18/yr, 2022-now +2/yr)

Verdict

The trap that looks like momentum but isn't. It rode the 2017-21 hype (+18/yr) then COLLAPSED after 2022 (+2/yr). Paying any price for 'growth' died in the reset -- while real momentum kept working. Expensive != winning.

What the test did and did not do

survivorship-free universe
point-in-time data
checked for look-ahead
net of real costs
tested out of sample

Almost nobody publishing a backtest says which of these they did. We list the ones we failed as well as the ones we passed.

Tested 2026-06-23. The same treatment, applied to every other system, is on the test bench.

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Written with AI assistance from our own test database. The numbers are computed, not composed.
General market commentary for education, not personalised investment advice. Backtested results are hypothetical. Trading carries a real risk of loss.