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What Is The Profitability Premium?

Robert Novy-Marx’s 2012 paper, “The Other Side of Value: The Gross Profitability Premium,” not only provided investors with new insights into the cross section of stock returns, it helped explain Warren Buffett’s superior performance—he bought value companies with higher profitability metrics.

Key Findings About Profitability

Novy-Marx’s study, which covered the period 1962 through 2010, used accounting data for a given fiscal year starting at the end of June of the following calendar year. Following is a summary of his findings:

Read the rest of the article on ETF.com.

 

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