Excess Returns, Ep. 35: Finding Diamonds in the Rough Among Growth Stocks

Buying expensive stocks has historically been a terrible investing strategy. On average, expensive stocks significantly underperform the market as a whole over time. But despite the poor performance of the group, the absolute best performing individual stocks typically come from within this universe. The difficult part is trying to identify them in advance. In this episode, we look at a quantitative growth strategy developed by Partha Mohanram, a professor at the University of Toronto, and how it seeks to find diamonds in the rough among growth stocks.

We discuss:

The trend in growth over value stocks over the last 10 years and some of the contributing factors to that trend.
The criteria behind Mohanram’s GSCORE model and how Validea implements the systematic growth stock selection model on the long side.
The types of companies the model selects and how that has contributed to it’s win-rate over the past 10 years.

We hope you enjoy the discussion.