Germany: -1.2% Underperformance with -50% Max Drawdown
OCF momentum returned 6.6% annually on German stocks, underperforming SPY by 1.2% with -50% max drawdown. Export-heavy economy where cash flows are more volatile than earnings.
Operating cash flow momentum returned 6.7% annually on German stocks from 2000 to 2025, beating the DAX by 1.6% per year. The DAX returned 5.0% annually. The strategy suffered a -50% max drawdown (worst among developed markets tested) and outperformed the DAX in 14 of 25 years (56% win rate). $10,000 grew to $41,850. The signal works in Germany but faces extreme cyclical swings in export-heavy industrials.
Contents
Data: FMP financial data warehouse, 2000–2025. Updated March 2026.
What We Found
| Metric | Germany (XETRA) | DAX |
|---|---|---|
| CAGR | 6.7% | 5.0% |
| Volatility | 22.7% | — |
| Max Drawdown | -50.3% | -55.4% |
| Sharpe | 0.25 | — |
| Win Rate (vs DAX) | 56% | — |
| Avg Stocks | 20.7 | — |
The -50% drawdown came from compounded underperformance in 2008-2014, not a single crash year. The strategy consistently picked the wrong German stocks during the eurozone crisis.
Why it struggled: German industrial companies (autos, machinery, chemicals) showed volatile OCF driven by working capital swings. The divergence signal misfired when earnings were more stable than cash flows.
Part of a Series: US Results | India +5.4% Alpha | Canada Best Sharpe | Global Comparison
Run It Yourself
Screen German stocks with OCF momentum on Ceta Research
Market cap threshold: €500M (~$545M USD), ROE > 10%, operating margin > 5%, OCF growth > NI growth.
Takeaway: Germany delivered modest alpha (+1.6%) vs the DAX with brutal drawdowns (-50%). The signal works but cyclical swings in export-heavy industrials make it a rough ride. 56% win rate shows consistency despite volatility.
Data: Ceta Research, XETRA 2000-2025. Full methodology: backtests/METHODOLOGY.md
