How Long is Long Term in Investing?

By Justin J. Carbonneau (@jjcarbonneau) —  As investors, we are taught to try and think long term. The story goes something like this — invest in stocks, stay disciplined and patient and let your money compound over many years or even decades and you can growth your wealth. I strongly believe in that story, but the reality is for many investors the definition of “long-term” becomes too narrow and time focused. When thinking about long… Read More

Industries Concentrate and Investors Profit

By Justin J. Carbonneau (@jjcarbonneau) —  At Berkshire’s Hathaway’s annual meeting, Warren Buffett announced he had purchased approximately 75 million additional shares of Apple. Apple is already Berkshire’s largest holding, and the purchase will make Buffett an owner of roughly 5% of the company. With a current market cap of $940 billion, this makes Berkshire’s stake in Apple worth close to $45 billion. His massive stake in the company shows he strongly believes in the… Read More

Want Consistent Market Outperformance? You May Want to Think Again

By Justin J. Carbonneau (@jjcarbonneau) —  We run over 40 quantitative models at Validea. They run the gamut of investing styles. Any time we can find a model from a respected source that uses factors and shows long-term outperformance, we will track it and add it to our arsenal. Our models range from deep value to growth to momentum. As we have studied these models over the years, one commonality has become very clear. And… Read More

Ben Graham’s Biggest Contribution May Not Be Value Investing

By Justin J. Carbonneau (@jjcarbonneau) —  If you Google “Ben Graham”, you will see that his name is synonymous with the value investing philosophy, and rightfully so. His book, Security Analysis, which was published in 1934 during the heart of the Great Depression, kicked off the era of classic value investing — that is, buying stocks that look cheap based on their assets or earnings. Graham’s investing philosophy was greatly influenced by the excesses seen… Read More

Finding Deep Value Stocks with the Acquirer’s Multiple

By Justin J. Carbonneau (@jjcarbonneau) —  In 2005, Joel Greenblatt, a successful hedge fund manager, published an incredibly simple book on disciplined value investing. The book, The Little Book that Beats the Market, went on to be a best seller. In the book, Greenblatt developed a method that sought to combine Ben Graham’s deep value stock selection approach with that of Warren Buffett, who is mostly known for buying high quality and profitable companies at… Read More

A Proven Strategy for Disciplined Growth Stock Investing

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 been conducted, value investing has proven itself over time.  However, that doesn’t mean that growth stocks should… Read More

Hidden Secrets in Warren’s Buffett’s Annual Letter to Shareholders

By Justin J. Carbonneau (@jjcarbonneau) —  Ok, just to be clear there are no real hidden secrets in Warren Buffett’s Annual Berkshire Hathaway shareholder letter (download the full letter here). You won’t find a map, like the in the movie “The Goonies”, leading you to Berkshire’s $116 billion cash hoard aboard some pirate ship. You won’t even find any hint on who Buffett is going to pick as a successor. Sorry to disappoint you. But… Read More

Aiming for Private Equity-Like Returns Using a Small Cap Value Quant Strategy

By Justin J. Carbonneau (@jjcarbonneau) —  “I do not like debt and do not like to invest in companies that have too much debt, particularly long-term debt. With long-term debt, increases in interest rates can drastically affect company profits and make future cash flows less predictable.” — Warren Buffett Of the twelve quantitative models we run publicly on Validea, nine of them look at a company’s level of debt in their assessment of a firm’s… Read More

U.S. Government Just Gave Investors Part of their “Super Stock” for Free (Sort Of)

By Justin J. Carbonneau (@jjcarbonneau) —  Sometimes someone says something that hits you like a ton of bricks. Well, in early January Warren Buffett was on CNBC and one of the topics he was discussing was tax reform and its impact on the value of stocks (see full video here, pick it up at the 17 min mark). In classic Buffett fashion, he makes a few very salient points that are worth digging into. Buffett… Read More

How an Investment Strategy Can Be at the Top and Bottom at the Same Time

By Justin J. Carbonneau (@jjcarbonneau) —  Imagine you’re presented with two investment models. Both hold a concentrated basket of 10 stocks, both are rebalanced monthly and both are built on factor-based investing methods. One of the strategies, let’s call is Model A, is up 58.1% for the year compared to a gain of 20% for the broader market. Ok, that 38% outperformance is pretty impressive. What about the other strategy, Model B, you ask? Well,… Read More