No single investment strategy ensures success and, as we have emphasized time and again, zig-zagging from one to another is a futile (and often costly) exercise. In a recent article for Nasdaq, Validea CEO John Reese explains how combining different investment methodologies can reduce overall volatility in a portfolio and lead to improved long-term results.
Since inception (in 2003), Validea’s Momentum Investor portfolio has returned 192.2% and our Value Investor portfolio has returned 238.3% (outperforming the market during that time by 78.2% and 199.9%, respectively).
Using these two strategies, the following stock picks were identified:
Value:
- Fossil Group Inc. (FOSL), a consumer fashion accessories company, has a strong revenue base ($3.16 billion), healthy liquidity (current ratio of 3.60) and a modest price-earnings ratio (7.80).
- Cal-Maine Foods Inc. (CALM), a U.S. marketer of shell eggs, gets high marks for its liquidity (current ratio of 7.50), low leverage (debt-to-equity of 1.7%) and 10-year average earnings-per-share growth of 206.3%.
- Dril-Quip, Inc. (DRQ) sells and services engineered offshore drilling and production equipment. The company is cash-rich (current ratio of 13.19) and debt-free. Long term EPS growth of 152.3% well exceeds this model’s minimum requirement.
Momentum:
- Supreme Industries, Inc. (STS) manufactures truck bodies, trolley and specialty vehicles. Quarterly EPS growth of 84.62% is nearly five times this model’s minimum.
- Argan, Inc. (AGX) provides engineering and related equipment and management services to the power generation and renewable energy markets. Strong quarterly EPS growth (62%) and five-year average annual EPS growth (27.09%) more than satisfy this model’s requirements.
