Excess Returns, Ep. 31: Can You Quantify Warren Buffett?

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

Where Will the Stock Market Be in Six Months? No One Can Agree

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

The “Value” Phoenix May Rise

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

Is the Price/Book Ratio Dead?

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

Berkshire’s Big Weakness Revealed in Crisis

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

Survey Says Negative Returns Expected by 41% of Retail Investors

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

The Stock Market Is Not Trusted by Institutional Investors

A survey of 100 institutional investors conducted last week (the II Fear Index poll) showed that 65 percent believe the long-term impacts of Covid-19 have not been sufficiently factored into stock markets, according to a recent article in Institutional Investor. Here are some other key takeaways from the survey: Bond prices were seen as “more realistic” with 59 percent of participants commenting that fixed-income markets accurately reflected the long-term effects of the coronavirus. For the… Read More

Rekenthaler on When to Buy Stocks Directly

In a recent Morningstar article, columnist and veteran fund researcher John Rekenthaler argued that novice investors should avoid the direct purchase of equities until they become “sufficiently educated.” Here are some of Rekenthaler’s key points: “The young investor who starts with stocks courts the danger of performing so badly as to become disillusioned, thereby abandoning equities.” “The math is unfavorable for the direct-equity investor,” Rekenthaler writes, explaining that market indexes are moved by a relatively… Read More

Excess Returns, Ep. 30: The Pros and Cons of Quantitative and Discretionary Investing

We all have a tendency to believe that the way we invest is the best way. As quantitative investors, we can sometimes feel that there is no reason anyone should ever use a discretionary strategy. But like most issues in investing, there are two sides to this argument. In this episode, we talk about the benefits of both quantitative and discretionary investing. We discuss: Why quantitative strategies can limit the impact of emotion and biases… Read More

Record Number of Fund Managers Say Stocks are Overvalued

A recent survey of fund managers by Bank of America Merrill Lynch shows that a record number of 78% respondents believe equities are overvalued following their rebound from the March low—the highest reading since the bank’s first such survey in 1998. This according to an article in Citywire. BoAML reports that the market rally, bolstered by government stimulus to fight the coronavirus-related economic fallout, has led investors to “move past ‘peak pessimism’ but any optimism… Read More