The Biggest Mistake of My Career, And What l Learned From It

By Jack Forehand (@practicalquant) It was a cold October day in 2016. I woke up at 3 AM to fly to see the biggest institutional client we had in our investment management business. We had jointly launched two funds with them in 2007 with a small seed investment they provided. Their head of new products had been a subscriber to our research website and had the idea to develop funds based on the quantitative strategies… Read More

Lessons From Our Most Read Five Questions Interviews

By Jack Forehand (@practicalquant) We have just passed the one-year mark of our Five Questions interview series. When we first launched the series, I wasn’t sure how it would go. I didn’t know if we could get the types of interesting guests I was hoping for. I also wasn’t sure if I could ask the quality questions it would take to make the interviews interesting (I still am not sure about that). Despite the apprehension… Read More

The Perils of Market Forecasting

By Jack Forehand (@practicalquant) — It’s that time of year again. The time of year where all the market experts make their 2020 predictions. You will see countless forecasts about what the economy will do in 2020. You will see many experts tell you what interest rates will do next year. And most of all, you will see a variety of predictions for where the S&P 500 is heading this year. The experts making these… Read More

The Danger of Overscrutinizing Out of Favor Investment Metrics

By Jack Forehand (@practicalquant) —   No investing factor has been maligned more than the Price/Book in recent years. In a period where value in general has performed very poorly, the Price/Book has struggled more than any of the other common value factors. When you couple that with the fact that the Price/Book’s failure to account for intangible assets makes its validity questionable in a world where more than 80% of assets are intangible, you have a… Read More

Five Questions: The Man Who Solved the Market with Gregory Zuckerman

If I asked you to name the greatest investor of all time, you would likely immediately think of Warren Buffett. And there is good reason for that. Buffett has put up 20% annual returns since 1965, which is about double what the market returned over the same period. If you didn’t name Buffett, you might think of Peter Lynch, which would be another good choice. Lynch steered the Magellan Fund to a 29% return from… Read More

A Framework to Evaluate Value Strategies

By Jack Forehand, CFA (@practicalquant) Earlier this year, I wrote about the mechanics of value investing and the many decisions that go into building value portfolios. Many investors believe that all value-based strategies will produce similar performance. But in reality, the many portfolio construction decisions that value managers make, which I highlighted in the article, can lead to major differences both in their performance and in the ability of investors to stick with their strategies.… Read More

The Facts About Buybacks

By Jack Forehand, CFA (@practicalquant) There might not be a more controversial topic right now in investing than stock buybacks. The debate over buybacks, which started out as a debate over their investment merits, has morphed into a political one that touches many of the controversial topics of our day such as income inequality and whether Wall Street continues to profit at the expense of average Americans. The negative press that buybacks have received has… Read More

Five Questions: Tackling Some of the Toughest Questions in Investing with Michael Mauboussin

By Jack Forehand, CFA (@practicalquant) There are many skills that can benefit you as an investor. Being smart is certainly an asset, although it can also get you in trouble if you don’t know your limitations. The ability to control your emotions is also a huge plus. But I think the most important skill may be the ability to think critically. Having a process you use to view the investing world through and following that… Read More

Five Questions: Factor Timing with Nicolas Rabener

By Jack Forehand, CFA (@practicalquant) Factor timing is a pretty controversial topic in the quantitative investing world. On one hand, we are all taught that we should buy low and sell high, so it seems intuitive to add exposure to factors that are out of favor. But in reality, it isn’t that simple and factor timing is much more difficult than it would seem in theory. This issue has also divided some of the smartest… Read More

The Rising Bar for Active Management

By Jack Forehand, CFA (@PracticalQuant) Active managers as a whole have always been pretty bad at their job. Depending on what data source you use and what time frame you look at, somewhere north of 80% of active equity managers underperform their benchmarks after fees over long periods of time. When building Validea, we’ve tried to key in on those individuals and strategies that have a long term record of success, but the number of… Read More