A Proven Strategy for Disciplined Growth Stock Investing

This article was originally published on March 5, 2018, but the performance and stock list has been updated.  By Justin J. Carbonneau (@jjcarbonneau) —  There is no shortage of evidence showing value investing works over time. From the actual track records of great investors like Warren Buffett, Mario Gabelli, Bill Ruane and Tom Knapp, who were inspired by value investing techniques developed by Ben Graham and David Dodd, to numerous tests and academic studies that have… Read More

Five Questions: An Academic Look at Factors with Lu Zhang

By Jack Forehand (@practicalquant) — One of the major challenges that the finance community has faced over the years is how to explain what drives stock returns over time. If the market is efficient, then the only way to generate excess returns is to take more risk. But risk only makes sense to take if you get compensated for it. Determining which risks receive that compensation has been the subject of significant research in the… Read More

Cash Flows Don’t Lie

Given the current political climate and the uncertainty surrounding the financial markets, it’s important for investors to stick to concrete concepts when evaluating stocks, says an article in last week’s Globe and Mail. The article asserts that, while earnings and valuations can be subject to “faking” due to accounting loopholes, “cash flows never lie.” It cites results of a study published in the Financial Analysts Journal that support the use of a ‘direct cash flow’… Read More

Morningstar Compares Research Data to Real-World Investing

There is an abundance of research data regarding how investors can maximize returns, but it doesn’t necessarily translate into real-world results, according to a recent Morningstar article. Alex Bryan, Morningstar’s director of passive research in North America, shared his insights on some discrepancies between the two: Fama-French Value Factor: In 1992, these economists found that stocks trading at low valuations, specifically low price-book ratios, have tended to provide higher returns than those trading at higher… Read More

Trading on Earnings Announcements Generates “formidable track record”

Before you dismiss this as a crazy investment strategy, consider that a recent study found it hasn’t done too badly, writes Steve Russolillo of The Wall Street Journal. Rutgers University professors Ivo Jansen and Andrei Nikiforov created a hypothetical trading strategy built around earnings announcements that demonstrated what Russolillo calls a “formidable track record.” The study found that stocks exhibiting sharp moves relative to the market in the week before an earnings announcement tend to… Read More

The Case Against Sound-Bite Investing

While many financial planners warn clients to steer clear of the media when making investment decisions, the advice often falls on deaf ears. New academic research reported in Investment News, however, not only supports this advice but extends the warning to any and all “public” investment rhetoric. The study results, reported by Don Dale of Northwestern University and John Morgan of UC Berkeley, indicate that “even when people know the quality of the information being… Read More