Investing Universe - The Market Leaders

The Market Leaders are solid companies with:
  • Above average Market Capitalization
  • Above average Shares Outstanding
  • Above average Cash Flow
  • 50% more Sales than the average company
  • Non Utilities

This group of companies was created by James O'Shaughnessy. His studies have shown that the Market Leaders have historically delivered better returns than the S&P500, Large Cap and Small Cap.

In addition, most strategies that O'Shaughnessy backtested using the Market Leaders as Investing Universe beat the same strategies using Large Cap, Small Call or All companies as Investing Universe. They are therefore excellent starting point in your stock picking, especially in Value Investing.

O'Shaughnessy uses them in his Cornerstone Value strategy that ranks the Market Leaders by Shareholder Yield (Dividend + Stock Buyback yield) or simply Dividend yield and then buys the Top 50.

How to screen for Market Leaders Go back to Top

Unfortunately, it is not that simple to screen for Market Leaders with most free stock screeners because they do not allow easy comparison to market or industry averages.

One of the cheapest solution is SmartMoney Select.

This screener has 2 special screening criteria called "Top % in..." and "Bottom % in...". They allow you to easily screen relative to industry or market average values.

SmartMoney Stock Screener - Comparison to Industry or Market averages


In addition, SmartMoney has a cool feature: when you select a criterion, the screener tells you what is the average value for major Indexes as well as the whole market: for instance if you select Price/Earning, SmartMoney will tell you the Average P/E for the Dow, S&P500...

Since the Market Leaders use lots of comparison to "average values" (above average Market Cap, above average Shares Outstanding...), SmartMoney's cool features allow to build a Market Leaders screen.


Below is a screen using SmartMoney to filter the Market Leaders.

Stock Market Leaders with SmartMoney Screener


I've exclusively used comparison to current Average Market Values ("Top % in All"). So you can use this "Relative" Screen in any Market environment.

You can see that in the "Values" field, I've selected the Top 15% in All for Market Cap. In fact, James O'Shaughnessy mentions that the filter on Market Cap selects the top 15% stocks in its database. Using the Top 50% Market Cap would still leave some Small Caps.

At time of screening (June 2008), it highlights 530 stocks or about 5% of the 10400 stocks available in the screener. 328 of those 530 stocks are in the S&P500.

Only 4 out of the 30 Dow Stocks did not make the cut, they are: Aloca Inc (AA), Citigroup (C), General Motors (GM), JP Morgan Chase (JPM).


Market Leaders are more adapted to Growth/Value screens with holding period >=1 year: they are not really for momentum investors. You can therefore subscribe to SmartMoney Select for just one month per year (5.95$) to get the list of Market Leaders for further screening.

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