A research using data between 1987 and 1993 demonstrates that EVA is a no better estimate in stock selection than the traditional ROE approach. However there were probably less accounting manipulations disclosed than more present. Would EVA be a better stock-picker during 1997-2003 time horizon? Though it's claimed that EVA's sound in evaluating mgmt's performance, then what's the point of reviewing the management without considering investing in the stocks? If the psychology of investing counts, apart from reading the charts, the approach that more people and analysts use may be more influential? How's the effectiveness of CFROI in stock selection? Appreciate for more inputs here from a real world point of view.

May I ask what research you are referring to?

Re. CFROI: There is an extremely high correlation between Discount Rate Spread (CFROI- DR) and Market Value / Invested Capital in many sectors and across all geographies I have tested. However, the fuller explanation/higher correlation is with changes in expected SVA/CVA (depending on which (trademarked) terminology you adhere to), and that is harder to model because you also need to forcast/have a view re. growth, whether revs/invested capital etc. All these are LT fundamental value type of relationships, with the respective implications for investment decisions. For shorter term decisions I would look at EVA/CFROI shocks triggered by EPS (consensus? Your views?) changes.

I was referring to Bernstein & Pigler's research which is in L2 curriculum. Thanks Grizzly for your input. Sorry I'm not an equity analyst so my own research would not be thorough enough compared with professionals(eg. some financial audits I downloaded from website don't show footnotes etc....). I just do it during my spare time apart from work and study. I work in Asia and have done some study on Taiwanese high-tech stocks. They are pretty cyclical and pretty much affected by the US market, since many of them are OEM/ODM suppliers of US firms (HP, TI, IBM, Compaq etc....). The prices, roralties, and skills have been pretty much dominated by the US firms. It's basically a very competitive market with little economies of scale. I found EBIT/EBITDA and EPS/ROE have been pretty correlated with the S-T swings. EVA and CFROI are difficult for me to get, so I haven't relied on them for my portfolio. Similar to the US market, however, the market has been in some significant lows in Sept and Oct. 2002 and April 2003. I couldn't help wonder the rebounds could be driven by either the fundamentals or the cycles, or both? There are a lot of noises in the market though, politics, govt interventions, relationship with China, elections etc... But I see it's efficient enough. Appreciate for more inputs regarding CFROI & EVA findings!

Thanks to the reference to Bernstein & Pigler article