You’ve probably heard the story about the monkey throwing darts at a newspaper and beating Wall Street pros. On one hand, I like that study—especially during volatile days like today where tariffs and geopolitical shifts make short-term price action feel completely disconnected from reality. It’s a great reminder of how much "noise" influences complex systems.
On the other hand, it made me wonder: can picking a stock based on specific fundamental parameters and data points actually outperform the chaos?
I wanted to see if giving companies a "Fundamental Score" based on data, fair value calculations, and industry trends could consistently beat the S&P 500. My background is in Mathematics, and I've spent time studying Mathematical Finance, so I wanted to apply a systematic approach rather than following market hype.
I ran a backtest from 2020 through the end of 2025 using **Point-in-Time (PIT)** data to account for earnings release lags and avoid look-ahead bias. Here are the results:
|**Period**|**Portfolio Average Return**|**S&P 500 Return**|
|:-|:-|:-|
|**2020–2025**|**+253.51%**|\+108.00%|
|**2021–2025**|**+149.02%**|\+83.00%|
|**2022–2025**|**+104.47%**|\+46.00%|
|**2023–2025**|**+116.16%**|\+75.00%|
In every period tested, this approach outperformed the S&P 500. It also maintained a 90% "win rate" (profitable tickers).
**The Methodology:** The model calculates a "Fundamental Score" by weighing factors like free cash flow yield, debt-to-equity, and historical valuation means. I’m currently refining the model to account for different market cycles (deep bear markets vs. high-interest-rate environments).
I’m planning to deep-dive into more parameters (portfolio weighting, volatility tracking, etc.) soon. I’d love to hear your feedback—is this level of outperformance sustainable, or am I missing a key risk factor in my valuation calculations?
I want to be transparent about the math and tickers. I’ve put the full backtest data and the scoring logic in a **pinned post on my profile** to keep this thread focused on the discussion and respect the sub's rules on links.
**TL;DR:** Backtested a fundamental scoring model from 2020-2025. It beat the S&P 500 in every window with a 90% win rate. Trying to determine if this is a fluke or if data-driven value is still the king.