The concept of quantitative investing, while gaining a lot of limelight these days, is not a new concept, writes Validea CEO John Reese in a recent Nasdaq article. Reese offers a profile of investing guru Joesph Piotroski, who authored a paper on the subject in 2000 which, writes Reese, “took Wall Street by surprise.”
Reese describes Piotroski’s philosophy which focused on the book-market value of stocks as well as other metrics that enabled him to differentiate those companies whose share prices were low due to underlying financial distress from those that represented good investment opportunities.
Using stock screening models Reese created based on the strategies of Piotroski and other investing legends, he identified the following high-scoring names:
- Tropicana Entertainment (TPCA) is an owner and operator of regional casino and entertainment properties. The company earns high marks for its book-market ratio as well as operating cash flow and return-on-assets.
- Vale SA (VALE) is a global producer of iron ore and iron ore pellets with a favorable ratio of price-earnings to growth in earnings-per-share (PEG ratio). The company scores well based on its return-on-assets and operating cash flow.
- Telefonica Brasil SA (VIV) is a mobile telecommunications company in Brazil that scores well based on its price-cash flow, price-book value and price-dividend ratios.
- Mitsui & Co. Ltd. (MITSY) is engaged in the product sales, logistics and financing as well as the development of international infrastructure and other projects. The company earns high marks for its upward trend in both liquidity and gross margin.
- Genesco Inc. (GCO) is a wholesaler and retailer of footwear, apparel and accessories with favorable liquidity and long-term debt that is considerably lower than net current assets.