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Does Cheapest 100 by Price/Book (deep value) actually work?

DEAD

No edge left once tested on a fair footing.

The claim

Hold the 100 lowest price-to-book stocks, equal-weight — Graham / deep-value crowd

What we did

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

The result

Result: 7.5 %/yr CAGR (cap-weight = +12.5)

+7.5%/yr CAGR, Sharpe 0.39, maxDD -71% (2017-21 +7/yr, 2022-now +8/yr)

Verdict

Deeper value, deeper hole: +8%/yr and the WORST drawdown of every cold rule we tried (-71%). Price-to-book as an organizing principle has been a wealth hazard this era.

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.