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Does Buy the Fastest Earnings Growers actually work?

DEAD

No edge left once tested on a fair footing.

The claim

Owning the companies with the highest earnings growth makes money — Growth-chasing folk wisdom

What we did

Tested against Equal-weight survivorship-free peer universe + SPY, net of cost, 2003–2026, OOS ≥ 2021.

The result

Result: -22.0 net-αSPY %/yr (beats index net of cost)

vPEERS −2.0 (WORSE than random), net-αSPY −22%/yr, hit 28%

Verdict

One of the most expensive 'obvious' ideas in markets. Buying the highest-earnings-growth names LOSES — worse than picking 50 stocks at random — because the growth is already priced in and you overpay for it. Growth is a great quality; chasing it is a terrible strategy.

What the test did and did not do

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

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.