Profitability
Gross profit ÷ total assets (Novy-Marx). Higher = more cash from each dollar of capital.
As of 2026-08-31 · 56 names held · backtest spans 238 months
Trailing returns
Cumulative return vs S&P 500 TR
Performance stats
| Metric | Factor | S&P 500 TR |
|---|---|---|
Annualized return (1 + total) ^ (252/4987) − 1 | +11.49% | +11.31% |
Annualized volatility daily-return stdev × √252 | +20.45% | +19.61% |
Sharpe ratio ann return ÷ ann vol (rf = 0) | 0.56 | 0.58 |
Max drawdown worst peak-to-trough on the cumulative series | -51.27% | -55.25% |
Information ratio ann excess return ÷ tracking error (vs S&P 500 TR) | 0.05 | — |
Monthly hit rate share of months where factor return > S&P 500 TR | 51% (121/238) | — |
How it's computed
What. At each month-end, take each ticker's most recently reported gross_profit (revenue − cost of goods sold) and divide by total_assets. This is gross profitability as defined by Novy-Marx (2013).
Why it has worked. Novy-Marx showed that *gross* profitability has roughly the same Sharpe as value, but is nearly uncorrelated with it — so combining the two materially improves a portfolio. Gross profit is harder to manipulate than bottom-line earnings (which can be inflated via one-time gains, accruals, etc.), so it's a cleaner read on what the business actually produces. Scaling by total assets puts firms of different sizes on the same footing.
Caveats. Sector-tilted: software and pharma will dominate the top quintile because of high gross margins, while capital-intensive sectors (utilities, materials) cluster at the bottom. The factor works partly *because* of and partly *despite* this sector tilt. A sector-neutral construction would mute the effect.
Current sector mix
| Sector | Names | % of screen | |
|---|---|---|---|
| Consumer Discretionary | 17 | 30.4% | |
| Information Technology | 15 | 26.8% | |
| Health Care | 10 | 17.9% | |
| Industrials | 6 | 10.7% | |
| Consumer Staples | 6 | 10.7% | |
| Communication Services | 2 | 3.6% |
Current top quintile (56 names)
| Ticker | Name | Sector | Signal ↓ | Z-score |
|---|---|---|---|---|
| ELV | Elevance Health, Inc. | Health Care | 35.5% | 3.77 |
| UNH | UNITEDHEALTH GROUP INC | Health Care | 31.6% | 3.77 |
| VRSN | VERISIGN INC/CA | Information Technology | 29.3% | 3.77 |
| FICO | FAIR ISAAC CORP | Industrials | 28.8% | 3.77 |
| SNDK | Sandisk Corp | Information Technology | 27.3% | 3.49 |
| DPZ | DOMINOS PIZZA INC | Consumer Staples | 27.1% | 3.46 |
| MU | MICRON TECHNOLOGY INC | Information Technology | 26.1% | 3.28 |
| NVDA | NVIDIA CORP | Information Technology | 23.6% | 2.81 |
| TPR | TAPESTRY, INC. | Consumer Discretionary | 22.8% | 2.67 |
| IDXX | IDEXX LABORATORIES INC /DE | Health Care | 21.3% | 2.40 |
| APP | AppLovin Corp | Information Technology | 21.3% | 2.38 |
| FAST | FASTENAL CO | Industrials | 20.1% | 2.16 |
| GWW | W.W. GRAINGER, INC. | Industrials | 20.0% | 2.15 |
| ADBE | ADOBE INC. | Information Technology | 19.7% | 2.10 |
| CL | COLGATE PALMOLIVE CO | Consumer Staples | 19.4% | 2.04 |
| ULTA | Ulta Beauty, Inc. | Consumer Discretionary | 18.4% | 1.85 |
| CVS | CVS HEALTH Corp | Health Care | 17.8% | 1.74 |
| PODD | INSULET CORP | Health Care | 17.7% | 1.72 |
| TER | TERADYNE, INC | Industrials | 17.6% | 1.71 |
| RDDT | Reddit, Inc. | Communication Services | 17.4% | 1.67 |
| YUM | YUM BRANDS INC | Consumer Discretionary | 16.8% | 1.56 |
| INCY | INCYTE CORP | Health Care | 15.9% | 1.39 |
| LULU | lululemon athletica inc. | Consumer Discretionary | 15.7% | 1.35 |
| WSM | WILLIAMS SONOMA INC | Consumer Discretionary | 15.7% | 1.35 |
| WMT | Walmart Inc. | Consumer Staples | 15.4% | 1.30 |
| MTD | METTLER TOLEDO INTERNATIONAL INC/ | Health Care | 15.1% | 1.25 |
| FTNT | Fortinet, Inc. | Information Technology | 15.0% | 1.23 |
| HAS | HASBRO, INC. | Consumer Discretionary | 14.8% | 1.19 |
| AAPL | Apple Inc. | Information Technology | 14.8% | 1.18 |
| ADSK | Autodesk, Inc. | Information Technology | 14.7% | 1.18 |
| EL | ESTEE LAUDER COMPANIES INC | Consumer Staples | 14.4% | 1.12 |
| IT | GARTNER INC | Information Technology | 14.2% | 1.08 |
| CTAS | CINTAS CORP | Consumer Discretionary | 14.2% | 1.07 |
| BBY | BEST BUY CO INC | Consumer Discretionary | 14.1% | 1.06 |
| NKE | NIKE, Inc. | Consumer Discretionary | 14.0% | 1.05 |
| LLY | ELI LILLY & Co | Health Care | 13.9% | 1.02 |
| PLTR | Palantir Technologies Inc. | Information Technology | 13.9% | 1.02 |
| ORLY | O REILLY AUTOMOTIVE INC | Consumer Discretionary | 13.9% | 1.01 |
| LOW | LOWES COMPANIES INC | Consumer Discretionary | 13.7% | 0.99 |
| SYY | SYSCO CORP | Consumer Staples | 13.6% | 0.97 |
| DLTR | DOLLAR TREE, INC. | Consumer Discretionary | 13.3% | 0.91 |
| MAS | MASCO CORP /DE/ | Industrials | 13.1% | 0.88 |
| FERG | Ferguson Enterprises Inc. /DE/ | Consumer Discretionary | 13.0% | 0.86 |
| DXCM | DEXCOM INC | Health Care | 12.9% | 0.83 |
| EBAY | EBAY INC | Industrials | 12.8% | 0.82 |
| HD | HOME DEPOT, INC. | Consumer Discretionary | 12.8% | 0.81 |
| TGT | TARGET CORP | Consumer Discretionary | 12.7% | 0.80 |
| NTAP | NetApp, Inc. | Information Technology | 12.7% | 0.80 |
| TJX | TJX COMPANIES INC /DE/ | Consumer Discretionary | 12.4% | 0.74 |
| MNST | Monster Beverage Corp | Consumer Staples | 11.9% | 0.66 |
| VRSK | Verisk Analytics, Inc. | Information Technology | 11.9% | 0.65 |
| GPC | GENUINE PARTS CO | Consumer Discretionary | 11.7% | 0.62 |
| ALGN | ALIGN TECHNOLOGY INC | Health Care | 11.7% | 0.61 |
| META | Meta Platforms, Inc. | Communication Services | 11.7% | 0.61 |
| NOW | ServiceNow, Inc. | Information Technology | 11.6% | 0.60 |
| DDOG | Datadog, Inc. | Information Technology | 11.5% | 0.57 |