Thoughts, ideas and insight from the top minds in the investment world
By Justin J. Carbonneau (@jjcarbonneau) — A few weeks ago my partner, Jack Forehand (@practicalquant) wrote a piece titled “The Mechanics of Value Investing“. In it, he highlighted the various ways in which value investing can be defined. This topic was recently brought to light again in a recent tweet (see below) by Tom Psarofagis, ETF Analyst at Bloomberg. As Mr. Psarofagis points out, the underlying holdings in “value” ETFS can often be very different.… Read More
Last week Validea Partner Justin Carbonneau was interviewed by Tobias Carlisle on the Acquirer’s Multiple Podcast. Toby and Justin discuss Validea and our approach to investing, as well as a bunch of other investing related topics. Below is an outline of the discussion and a link to the video. How Validea capture’s quantitative models and what we do with them; How we actually implement these strategies in the real world; The underperformance of value stocks,… Read More
By Jack Forehand, CFA (@practicalquant) This is Part II of my interview with Jim O’Shaughnessy. If you missed Part I, you can find it here. In part II, we talk about trend following, the future for simple value investing, and we take in in depth look at some of the arguments others have made in favor of the death of value investing. Just a note before we begin. This interview was transcribed from a phone… Read More
By Jack Forehand (@practicalquant) — Within the past year, I have been fortunate to interview some of the smartest minds that I know in investing for our Five Questions series. I was able to talk to Alpha Architect founder Wes Gray about quantitative value investing. I talked Daniel Crosby about behavior in investing. I spoke to Ben Hunt about how things have changed in the market and why we may not be able to rely… Read More
A new paper published by two executives at Research Affiliates says that the best-performing multi-factor portfolios include the momentum factor. This according to an article in Institutional Investor. The article reports that the momentum factor has been criticized for having high trading costs that negatively impact returns, but the RA study’s analysis of different multi-factor portfolios found that the best balance between “effectively harvesting the factor premium and implementation costs” was in a portfolio that… Read More
Although value stocks have lagged for a long time, an article by Wall Street Journal columnist Jason Zweig argues that the strategy’s champion, Benjamin Graham, still had the right idea. Zweig notes, “faster-growing, higher-priced stocks have outperformed by such huge margins that the long-run advantage of value stocks has withered away. Will that last? Probably not. Was Graham wrong? Almost certainly not.” The article points out three important tenets of Graham’s teachings: A stock “isn’t… Read More
An article in CFA Institute outlines factors to consider before investing in indexed annuity products that promise a “minimum amount of interest plus potentially additional interest based on the price change of a financial index with complex indexing features, such as participation rates, interest rate caps, and spreads.” The article reports that more than 50 “volatility-controlled” indexes are attracting investors hoping to take advantage of rising financial market indexes, but the complexities of these products… Read More
Edwin “Tim” Johnston III, founder of Buffalo-based Sandhill Investment Management, shared his views on the markets in a recent interview with Barron’s. Here are some highlights from Johnston’s comments: On the stock market: “We sold quite a bit of stock last summer because it was very clear that valuation levels were not sustainable.” Investment methodology: “The gospel for us is speaking to the companies. We talk to a lot of CEOs personally, to chief financial… Read More
According to an article in Yahoo Finance, Berkshire’s recent investment in Amazon “flies in the face of his long-held investing views” and signals “it’s okay to buy high price-to-earnings multiple companies provided they will change the game at some point in the future.” The article notes that Amazon’s stock, which is trading at a “lofty” price-earnings multiple of 51 (data from Yahoo Finance), is “known for not having steady profits as it invests aggressively to… Read More
In an interview with Citywire, lead portfolio manager for the Fiera Capital US Equity fund Nadim Rizk discusses his buy-and-hold strategy. Rizk characterizes his fund’s approach as “tectonic—everything is very slow,” adding that he is rarely tempted to make changes. In fact, the fund made no moves in 2018 (even during the Q4 correction) or so far in 2019: “A one to two-month correction is not enough for us to react to market changes,” he… Read More
In an article for CFA Institute, Thomas Mayer, CFA, PhD (founding director of the Flossbach von Storch Research Institute) proposes an approach to explain price movements in financial markets. The key points of the approach, called the “Discovering Markets Hypothesis,” are summarized as follows: “When investors act or observe action in the market, they can improve their knowledge by comparing theirs to others.’ While investors can share and compare their subjective knowledge and cause prices… Read More
Although inflation has long fallen short of the Federal Reserve’s 2 percent target for years, some of the biggest funds are betting on the tide turning, according to an article in Bloomberg. “A tight labor market, and the Fed’s willingness to consider putting off raising interest rates this year and letting inflation run hot, are bound to raise expectations and push up consumer prices,” the article says, adding, “That means getting into inflation-protected Treasuries, commonly… Read More
The AAII Journal recently reported on a survey it conducted to evaluate what lasting impact the 2007-2009 financial crisis has had on its members’ investing decisions. Here are highlights of the results from 227 member respondents: 46% indicated that they changed their investment strategy or portfolio allocation; 22% described themselves as having become more cautious, patient or adoptive of a more conservative approach; More than 8% said they pay more attention to the market; Nearly… Read More