In this episode, we are going to try something a little different. Our goal at Validea is to capture quantitative strategies that work over the long-term. To do that, we go through books and academic papers to find factor-based models with results to back them up. We are going to periodically do some episodes for the podcast where we do a deep dive into these strategies and look at the factors behind them. In the… Read More
By Jack Forehand, CFA The Price/Book has probably been the most important valuation ratio of the past century. If you look at the academic research that supports value investing, you won’t find any other ratio that is referenced more often. When Fama and French built their famous 3 factor model, value was measured using the Book/Market, which is the inverse of the Price/Book, and much of the academic research since then has followed suit. Since many… Read More
In its first major acquisition since the coronavirus pandemic struck, Berkshire Hathaway has agreed to purchase natural gas transmission and storage assets of Dominion Energy for $4 billion, according to an article in CNBC. Including the assumption of debt, the article reports, the deal totals almost $10 billion: “For Dominion, the move is part of its transition to a pure-play regulated utility company that focuses on clean energy production from wind, solar, and natural gas.”… Read More
As the coronavirus crisis continues to affect U.S. companies and trigger defaults and bankruptcy filings, a recent article in The Wall Street Journal reports that, for the most part, “the companies that have succumbed were already heavily indebted and in industries that were declining before the pandemic.” The hit to the top line due to the shutdown, the article says, “tipped them over the edge.” The outlook for healthier companies, however, has “brightened considerably over… Read More
In contrast to the average 16% annualized returns the S&P 500 delivered over the past 11 years, Research Affiliates founder Rob Arnott expects paltry returns in the coming decade. This according to a recent article in Financial Advisor magazine. The article reports that, according to Arnott, “a traditional 60-40 portfolio is likely to deliver somewhere between zero and 1% over the next decade, a period when all baby boomers will have reached normal retirement age.”… Read More
A study by LPL Financial shows that if the S&P 500 is up three months before election day, the incumbent party nearly always wins. This according to an article in Chief Investment Officer. The study shows that the phenomenon has held true 87 percent of the time since 1928 (when what is now called the S&P 500 index was formed) and in every election since 1984. “The market-election nexus theory makes some sense,” the article… Read More
A fifth of respondents in a recent survey predicted the S&P 500 will be up more than 10% by the end of this year, about the same number who predict it will be down by that amount. This according to a recent Bloomberg article. Nicholas Colas, co-founder of DataTrek Research (the firm that conducted the survey) wrote that in the 341 responses received “every option from ‘really bad’ (down +10% from here) to ‘really good’… Read More
A recent Advisor Perspectives article argues that the value investing strategy shouldn’t be counted out just yet. “We have seen flickers of value’s reemergence,” it reports, adding, “After outperforming momentum by roughly 6% in September 2019, value has staged another noteworthy rally, outperforming momentum by over 2.5% in just one week. The real question is: when will the value rally stick?” The article cites the following key points: Factors are cyclical: While some contend that… Read More
Warren Buffett’s Berkshire Hathaway “has always defied neat categorization,” but his quiet market response to the recent crisis has “fueled questions about what shareholders actually get when they invest in Berkshire.” This according to a recent article in Bloomberg. The article notes that Berkshire has lagged the broader market over the past five years partly because the conglomerate’s mammoth size (market value of $441 billion) means that Buffett needs “bigger buyouts or larger stock purchases… Read More
A recent survey of U.S. investors reflects a climate of “confusion and disconnect,” with retail investors feeling “both bullish and bearish about the future of the stock market and whether they should put money in now.” This according to an article in Yahoo Finance. The results of the survey, conducted by Yahoo Finance and Harris Polls and including 200 participants, showed that 41% expect negative equity returns over the next five years. But despite the… Read More