Positioning for 2016

  Patrick O’Shaughnessy of O’Shaughnessy Asset Management says “if you look historically at what broad categories do well during period of rising rates . . . value stocks tend to do well.”  He notes that “this year has been the opposite story,” but with Fed rate increases widely anticipated, O’Shaughnessy says, “we would recommend that people re-position towards value stocks.” Andrew Slimmon of Morgan Stanely Investment Management says he anticipates stocks will do “modestly better”… Read More

Re-defining Value

The value premium may seem to have disappeared. Since 1926, cheaper stocks have outperformed expensive ones by 400% according to data from Normura (see graph below). Since February 2007, however, a value investor relying on price-to-book, which is the traditional measure of value and defining trait of the Russell 1000 Value Index, would not have reaped the gains that one would expect from this historical data. Why? Barron’s reports that, according to Joseph Mezrich of… Read More

When It Comes To Growth Or Value, Have Your Cake And Eat It Too

It’s extremely common to hear investment commentators talk about “growth” and “value” as though they are polar opposites. But Validea CEO John Reese says not to buy that false notion. “When it comes to investing’s great ‘either/or’ – that is, the growth or value debate – you can have your cake and eat it, too,” Reese writes for Canada’s Globe and Mail. “That’s because the great growth versus value debate is, in fact, a false… Read More

Don’t Get Spooked By Value Stocks

Value stocks may have underperformed growth stocks for several years now, but Validea CEO John Reese says investors would be wise not to pronounce value investing dead anytime soon. “Given that it’s Halloween season, it seems appropriate that value stocks are starting to stage a comeback in the United States,” Reese writes in his latest column for Canada’s Globe and Mail. “Much like the villain in a scary slasher flick, value stocks have been beaten,… Read More

Here, There, and Everywhere — Value Wins

Think value is overrated? Think again. In a recently released Swiss Finance Institute Research Paper, Nilufer Caliskan and Thorsten Hens of the University of Zurich looked at value and growth stock returns across 41 different countries, and found that in every one, value outperformed over the long term. “In this study, we provide strong empirical evidence that the value premium exists world wide and differences across countries can be explained by differences in risk aversion… Read More

Study: Biases — Not Risk — Are Behind Value’s Outperformance

A new study shows that value investors who remain patient and rational tend to make out better in the market than those who buy up flashier stocks. According to Canada’s Financial Post, the study — performed by The Brandes Institute — examined how stocks performed in the year after reporting earnings. The findings: Value stocks on average rose, whether they beat earnings expectations or not; “glamour” stocks — big names in flashy industries like technology… Read More

Reese: Growth & Value Not an Either/Or

In the latest edition of his Hot List newsletter, Validea CEO John Reese says that investors too often fall prey to the idea that growth and value are opposing concepts. In reality, he says the best stocks include aspects of both value and growth plays. “In the dozen or so years I’ve spent studying history’s most successful investment strategies, I’ve found that paying too much attention to such style-box distinctions can be harmful to your… Read More

The Two-Pronged O’Shaughnessy Attack

Every other issue of The Validea Hot List newsletter examines in detail one of John Reese’s computerized Guru Strategies. This latest issue looks at the James O’Shaughnessy-inspired strategy, which has produced annualized returns of more than 6.7% since its inception more than six years ago, a period in which the S&P 500 has gained just 1.3% per year. Below is an excerpt from today’s newsletter along with several top-scoring stock ideas based on the O’Shaughnessy… Read More