UK stocks - Ceta Research

Growth comparison of expanding vs contracting margin portfolios on the LSE from 2000 to 2025.

margin expansion

Margin Expansion in the UK: A Signal That Strengthened Over 25 Years

We tested margin expansion on LSE stocks from 2000 to 2025. Expanding margins returned 7.49% CAGR vs 5.07% for contracting, a +2.42% annual spread. The signal was negative in 2000-09 but strengthened to +5.6% by 2020-25. Beta 0.918, alpha +0.50%. Zero cash periods across all portfolios.

ROIC

Sustained ROIC on UK Stocks: 7.88% CAGR, Beats FTSE 100 by 6.73%

Sustained high ROIC on LSE stocks from 2000 to 2025. 7.62% CAGR vs 7.30% SPY. Borderline alpha (+0.32%), but the quality spread is real: sustained beats low ROIC by 2.74% annually. Down capture of 74.9%.

Growth of $10,000 invested in Graham Net-Net UK (LSE) vs S&P 500 from 2001 to 2024.

NCAV

Graham Net-Nets on UK Stocks: The Academic Premium That Disappeared

Xiao and Arnold (2008) found 19.7% annual returns for UK net-nets from 1980-2005. Our 2001-2024 backtest finds -0.62% CAGR. Two spectacular recovery years (+99% in 2009, +66% in 2020) couldn't offset persistent losses in normal markets.

Growth of $10,000 invested in FCF Yield Screen vs S&P 500 from 2000 to 2025, UK LSE stocks.

free cash flow

FCF Yield Screen on UK Stocks: 25-Year Backtest

We screened for high FCF yield on London Stock Exchange stocks from 2000 to 2025. 10.04% CAGR, +8.81% excess over FTSE 100. In 2008, the portfolio fell only 5.2% while FTSE 100 dropped 22%. Down capture of 21% with 193% up capture. Quality-filtered cash generators dominate flat UK markets.

Growth of $10,000 invested in Defensive Quality UK screen vs S&P 500 from 2000 to 2024.

defensive investing

Defensive Quality UK: 11.19% CAGR, -7.78% Max Drawdown, Sharpe 0.641 Over 25 Years

We ran the defensive quality screen on LSE stocks from 2000 to 2024. 12.63% CAGR, +4.80% excess, max drawdown -9.99%, Sharpe 0.666. The UK delivered the best risk-adjusted performance across 16 exchanges in our study. One caveat upfront: the universe averaged only 13.6 stocks per period.

Growth of $10,000 invested in DuPont ROE portfolios on UK stocks (LSE) vs FTSE 100 from 2000 to 2025.

DuPont analysis

DuPont ROE on UK Stocks: +5.30% Over FTSE 100, Leverage Leads at 7.70% CAGR

DuPont ROE decomposition on LSE from 2000-2025. Leverage-driven ROE at 7.00% CAGR beat margin-driven at 4.30%. The UK reverses the US pattern: commodity-heavy sectors and dividend culture reward productive leverage.

low volatility

Low Volatility Quality on UK Stocks: +5.1% vs FTSE 100, 49% Down Capture

Low-vol quality stocks on the LSE returned 6.46% CAGR, beating the FTSE 100 by +5.11% annually from 2000 to 2025. Down capture of 48.76%, max drawdown -26.21% vs -42.12% for FTSE 100. Zero cash periods across 103 quarters.

income quality

Income Quality on UK Stocks: The Signal That Can't Separate

We tested income quality (OCF/NI) on 25 years of LSE data. The spread between high and low quality is just 0.5% per year. All three buckets returned nearly identical CAGRs. The UK market is too cash-generative for this signal to separate.

Growth of $10,000 invested in FCF Conversion Quality on UK stocks vs FTSE 100 from 2000 to 2025. Strategy grew to $79K in GBP.

quality investing

FCF Conversion Quality on UK Stocks: 84% Win Rate and 18% Down Capture vs FTSE 100

FCF Conversion on LSE stocks returned 8.64% CAGR from 2000-2025, beating the FTSE 100 (1.23%) by 7.42% annually. 84% win rate, 18% down capture. The strongest relative performer in our global analysis.

Growth of $10,000 invested in FCF Compounders vs FTSE 100 on UK stocks from 2000 to 2025. Strategy grew to $69K, FTSE to $14K.

quality investing

FCF Compounders on UK Stocks: +6.82% Annual Excess vs FTSE 100 Over 25 Years

FCF Compounders screen on LSE from 2000-2025. 8.04% CAGR vs 1.23% for the FTSE 100. The filter was invested in only 13 of 25 years, but when it fired, it beat the benchmark by an average of 15% per year.

Growth of $10,000 invested in Dividend Sustainability UK vs FTSE 100 from 2000 to 2025.

dividend investing

Dividend Sustainability on UK Stocks: 8.52% CAGR With the Shallowest Drawdown Globally

The dividend sustainability screen on LSE stocks returned 8.52% CAGR with a max drawdown of just -15.93%, the shallowest across all 13 exchanges tested. 7.29% annual excess over FTSE 100, 9.1/10 average sustainability score (highest globally).

Growth of $10,000 invested in Rising Dividend Yield on LSE vs FTSE 100 from 2000 to 2025. Returns in GBP.

dividend investing

Rising Dividend Yield on UK Stocks: +5.63% Annual Alpha vs FTSE 100 on LSE

Rising dividend yield on LSE: 6.86% CAGR, +5.63% annual alpha vs FTSE 100. The strategy works as a UK stock selector. Sharpe of 0.149 and -49.27% max drawdown are the honest costs.