Mauboussin Offers Insights on Active Management

A recent Forbes article offers comments and insights gathered in a recent interview with Michael Mauboussin, Director of Research at BlueMountain Capital Management (formerly Head of Global Financial Strategies at Credit Suisse): Mauboussin underscores two risks inherent in value investing: (1) buying a cheap stock that “deserves to be even cheaper”—a value trap; or (2) “shunning a statistically expensive stock that represents a good value.” While indexing is a reasonable path for most investors, it… Read More

Is Value Investing Dead?

Reporting on a Goldman Sachs study published a few months ago, a recent article from the Wharton School addresses the underperformance of value compared to growth strategies. The Sachs report, it says, claims that “value investors are seeing the longest dry spell since the Great Depression, and future returns will likely be lower than the historical average.” But the firm also acknowledges that assessing whether value strategies are in trouble depends on how one views… Read More

Einhorn Says Value Investing Will See Comeback

Value investing is in the doldrums, but billionaire fund manager David Einhorn says that eventually things will turn around. This according to a recent CNBC interview. Einhorn argues that the last time value saw a turnaround– after the dot-com bubble in 1999 when, he said, “everyone was talking about eyeballs as the new paradigm for investing”—it ended badly for momentum investors. He believes that value investing will rebound: “When it reverts,” he adds, “it tends to… Read More

Growth Stocks May be Outperforming, But Value Will Come Back

Since the financial crisis, growth stocks have beaten value but, over the long-term, value will have its day in the sun. This according to a recent article in the Financial Post. “Over the long term, buying value and ignoring the shiny, well-liked stocks has paid off,” the article says, but the reversal in performance over the last decade has seen return-hungry investors gravitating toward dividend-payers and tech stocks and the “cheaper” parts of the market… Read More

Value Strategies and Quant Approaches

The term “value investing,” is often used to described strategies “derived from simple ratios of accounting numbers to stock prices,” according to a recent article by the CFA Institute. “The ugly truth,” the article says, “is that many value funds apply dime-a-dozen strategies built on formulaic accounting ratios. Investors are better off looking for managers who deploy more comprehensive analysis to determine the intrinsic value of the underlying securities.” The article cites the book Security… Read More

Value Investing Trends

A recent Morningstar article addresses the persistent lackluster performance of value stocks and whether it is a temporary situation or something more permanent. According to participants in this year’s Morningstar ETF Conference, the article reports, “it’s never easy to be a value investor,” and “value stocks today are behaving just as they should.” John West, managing director at Research Affiliates, shared his view that, “The world is unfolding exactly as it should,” underscoring that most… Read More

Three Slogans that Don’t Work for Money Managers, But Should

By Jack M. Forehand — One of the interesting things about investing is that the approaches that work the best in raising capital and obtaining clients are often the worst approaches in terms of producing the best long-term outcomes. Things like chasing strong recent performance, owning the stocks everyone wants to own, and the belief that successful investing needs to be complex all look great on paper, but none of them typically lead to optimal… Read More

Factor Strategy Focus – Benjamin Graham

By Jack Forehand — When we started following guru-based models, the term factor investing didn’t exist. We just wanted to find a way to outperform the market, and we realized that only a very small group of investors had successfully done that – and we certainly weren’t in that group. So we decided to follow investors who had long-term records of beating the market and whose strategies could be quantified. We read their books and… Read More

Piotroski and Book/Market-Based Investing

 In a recent article for Nasdaq, Validea CEO John Reese shares insights on quantitative investing and outlines the approach of Stanford University accounting professor Joesph Piotroski (a market guru that inspired one of the stock screening models Reese created for Validea). Piotroski, writes Reese, was a trailblazer in the investment approach, turning heads on Wall Street in 2000 with his research on unpopular companies with high book-market ratios (defined as total assets minus total liabilities… Read More

Columbia’s Bruce Greenwald on Value Investing

When Columbia professor Bruce Greenwald first arrived at the university, value investing wasn’t terribly popular, but he was convinced it was a much better approach. This according to a recent interview with Barron’s. Here are some highlights from the interview: “Specialization is an old and honorable Graham and Dodd tradition.” Greenwald references successful value investor Mario Gabelli, arguing how his specialties have served him well. “When you start out,” he says, “you want to have an… Read More