Value — selection & rebalancing
How the top stocks are selected
At each rebalance, every S&P 500 company is scored by its earnings yield — how much profit it earns per dollar of market value:
score = net income (most recent fiscal year) ÷ market cap
Market cap is shares outstanding × that month's close. The engine holds the N highest-yield names (the cheapest relative to profits) in equal weight. A high earnings yield is the same idea as a low P/E; using total net income (rather than per-share EPS) keeps it consistent with our split-adjusted prices. Companies with negative earnings score low and are not selected.
When it buys and sells (the rebalance)
Prices are month-end closes. Value ranks on the prior month-end and trades at the current month-end close, using the latest fiscal-year earnings reported as of that date.
Worked example — N = 5, quarterly rebalance
- Ranking input (for a March 2023 rebalance): each stock's fiscal-year 2022 net income divided by its market cap at the Feb 2023 month-end. (Using the prior completed fiscal year avoids acting on figures before they were reported.)
- Fri, 31 Mar 2023 — at the close. Buy the 5 highest-yield names at 20% each; sell anything that dropped out.
- Apr & May — no trading; monthly cash is added pro-rata.
- Fri, 30 Jun 2023 — at the close, re-rank and reset to equal weight. And so on.
Data window & caveats. Fundamentals come from yfinance, which only exposes about 4–5 years of annual statements. So the Value backtest effectively begins around 2022 — earlier months have no fundamentals and are skipped (much like Momentum's 12-month warm-up), while Market Cap, Momentum, and Low Volatility still run from 2016. It uses annual net income (not trailing-twelve-month), applied with a roughly one-year reporting lag, on the current S&P 500 membership. Every trade is modeled at the month-end close. Educational only — not investment advice.
The Rebalance style controls what happens to the weights at each rebalance — a full equal-weight reset, a reset only when the line-up changes, or trading just the additions and removals.