Five Questions: Defending Value Investing with Tobias Carlisle

As those who read my articles know, I am a big believer in value investing. But I also understand that as a follower of value, I am prone to focusing on information that supports that belief. A while back, I tried to combat my own confirmation bias by writing an article that looked at the arguments against value investing. That article ended up being the most read article of all time on our blog. So… Read More

What Quant Value Models Can and Can’t Do for You

By Justin Carbonneau (@jjcarbonneau) – Two weeks ago I wrote an article, Differences in Value, where I outlined the various criteria (i.e. price-to-sales, price-to-book, and enterprise value-to-EBIT) used in the value models on Validea. As the piece got passed around Twitter, there was a very good comment by Tren Griffin, an investor and thoughtful writer. Griffin tweeted the following (see below – included in the tweet was a screenshot of a page from Berkshire’s Hathaway’s… Read More

Trying to Put the Struggles of Value Investing in Context

By Jack Forehand, CFA (@practicalquant) — Value stocks have struggled for a long time now. Although the degree of underperformance can vary significantly based on the metric you use and the universe you apply it to, there is no question that the past decade has been a bad one for value investing. And the past five years have been even worse. I have always been a big believer in value, but it is only natural… Read More

Differences in Value

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

Perspective: Berkshire’s Amazon Stake and Value Investing

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

Validea’s Justin Carbonneau on the Acquirer’s Multiple Podcast

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

Joel Greenblatt Talks Value Investing, Investor Emotions and his Magic Formula

In a recent Masters in Business  podcast interview with Bloomberg columnist Barry Ritholtz, investor, professor, author and co-chief investment officer of Gotham Asset Management Joel Greenblatt talks about his early days in investing, the concepts behind his books, and his firm’s investing methodology. Here are highlights from the interview: Greenblatt recalled first becoming interested in Benjamin Graham’s strategy as a junior at the Wharton School.  At the time, he was being taught the efficient market… Read More

The Mechanics of Value Investing

By Jack Forehand (@practicalquant) — We all have a tendency to want to put investing strategies into groups. That can sometimes be misleading, though. There are more investment products than I can count that use the word value in their name. But beneath the surface, many of those products couldn’t be any more different. Those differences can lead to substantially different outcomes in both the long- and short-term, so it is very important to understand… Read More

Is There Hope for Value Investing?

A recent article in The Wall Street Journal argues against giving up on value investing notwithstanding more than a decade of poor performance. It contends, however, that there’s more uncertainty about the strategy than there once was because: Value investors have never been “ground down for so long;” If investors understand value’s “great history,” then they are less likely to overreact to bad news, which would mean that value stocks would become less of a… Read More

Is Traditional Value Investing in the Danger Zone?

A recent Forbes article suggests that true value investing requires a comprehensive approach to analyzing companies, not just a reliance on the price-to-book value. The article cites two comments made by Berkshire Hathaway CEO Warren Buffett in 2018 might “serve as the epitaph on the grave of the old era of value investing. The first, from Buffett’s 2018 letter to Berkshire shareholders, reads: “The fact is that the annual change in Berkshire’s book value…is a… Read More