To construct a portfolio with the best strategies implemented, we decide to take other great strategies as reference and build a strategy that will be proved effective through the method of backtest.
We started by examining the four basic models in the ranking system, which are the growth model, momentum model, quality model and value model, because we believe these models cover the basic but essential part of how a strategy forms. To analyze these models, we run the backtest and see how the performance was of each of the models and analyze how these models are affected by different selecting factors with the reverse engineering technique. We can see the past performance of each of the basic strategies as the below graph.
Quality 
Growth 


Momentum 
Value 


From the graph we could see even though the models are somewhat predictive, their performance aren’t very significant and can be inconsistent during time to time. After acknowledging this fact, we try to parse out the effective parts of each of the models, and by combining those parts we expect to see a better model with better predicting power and more consistency.
Using the reverse engineering technique, we take the top contributing factors from the basic models and put the factors into our new model.
Momentum Strategy 
price_change_120; price_change_140; price_change_160; price_change_180; updown_ratio_20 

Quality Strategy 
ROE5%5YAvg; ROI%5YAvg; CurRatioQ; DbtTot2CapQ; IntCovTTM; 

Value Strategy 
PEGLT; Pr2CashFITTM; ProjPECurFY; PEExcXorTTM; Pr2BookQ 

Growth Strategy 
EPS5YCGr%; EPS_Acceleration_long_term; Sales5YCGr%; Sales_Acceleration_recent; Sales_Acceleration_Longer_term 
After putting all these factors into our model, we run again the backtest and see how our new model performs. The performance is as the graph below. We could see the performance has improved dramatically with the performance of our portfolio constructed with top selected stocks outperforms S&P 500 significantly. However, from the chart we could still discover some inconsistencies and we wonder whether we could keep improving our model by leveraging the reverse engineering technique. Thus, we run again the technique and tune the weight of each factors through considering the reverse engineering result. The result is as the following graph at the right side. While the performance of the portfolio with the best stocks is similar to the previous model, we could see that the model delivers a more consistent performance with different level of stocks.
In conclusion, we believe we have constructed a good model with solid and consistent performance.
Final Selecting Factors and Explanation
Strategy 
Variable 
Weights 
Formula 
Explanation 
Momentum 
120+ 
5% 
close(0) / close(120) 
We use this variable to detect the influence from past stock price. 
140+ 
5% 
close(0) / close(140) 
We use this variable to detect the influence from past stock price. 

160+ 
5% 
close(0) / close(160) 
We use this variable to detect the influence from past stock price. 

180+ 
5% 
close(0) / close(180) 
We use this variable to detect the influence from past stock price. 

updown ratio 20+ 
5% 
UpDownRatio(20,0) 
To help evaluate the relationship between the volumes of advancing and declining issues on an exchange. 

Quality 
ROE%5YAvg 
5% 
Return on Average Common Equity, 5 Year Average (%) 
Use 5 years of past ROE to see how the company is performing. 
ROI%5YAvg 
5% 
Return on Investment, 5 Year Average (%) 
Use 5 years of past ROI to see how the company is performing. 

CurRatioQ 
5% 
The ratio of total current assets for the period divided by total current liabilities. 
To evaluate the shortterm liquidity of the company. 

DbtTot2CapQ 
5% 
This ratio is total debt divided by total capital. 
To evaluate the leverage level of the company. 

IntCovTTM 
5% 
Times Interest Earned 
To evaluate the ability to pay back interest by the company. 

Growth 
EPS5YCGr% 
5% 
Earnings Per Share, 5 Year Growth Rate (%) 
To evaluate the company growth by EPS growth rate. 
EPS Acceleration  longer termƒ(x) 
5% 
( EPS%ChgTTM EPS5YCGr%)/abs( EPS5YCGr%) 
To evaluate the company growth by how EPS grow in the longrun. 

Sales Acceleration  longer termƒ(x) 
5% 
( Sales%ChgTTM Sales5YCGr%)/abs( Sales5YCGr%) 
To evaluate the company growth by how sales grow in the longrun. 

Sales5YCGr% 
5% 
Sales, 5 Year Growth Rate (%) 
To evaluate the company growth by the 5 years sales growth. 

Sales Acceleration  recentƒ(x) 
5% 
(Sales%ChgPYQ Sales%ChgTTM)/abs( Sales%ChgTTM) 
To evaluate the company growth by how sales grow recently. 

Value 
PEGLT 
5% 
Projected Price/Earnings to Long Term Growth Rate 
To evaluate the project price divided by earnings. 
Pr2FrCashFlTTM 
5% 
Price To Free Cash Flow Per Share Ratio, TTM 
To evaluate the ratio of stock price to free cash flow per sharpe ratio 

ProjPECurFY 
5% 
Current Fiscal Year Projected P/E Ratio ($) 
To evaluate the projected PE ratio. 

PEExclXorTTM 
5% 
Price To Earnings Ratio, Excluding Extraordinary Items, TTM 
To evaluate the stock compared to the earnings. 

Pr2BookQ 
5% 
Price to Book Ratio, Quarterly 
To evaluate the price to book ratio in order to understand the ratio of stock price and book value. 