The Danger of Learning From Your Mistakes

By Jack Forehand, CFA One of the major changes I have made in my life in the past few years is that I have significantly increased my focus on learning. In the past, I tended to focus too much on the things I knew, while not focusing enough on the things I didn’t. That changed for me when I realized that no matter how much I know, the number of things I don’t know will always… 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

Human vs. Quant Investing

The Human vs. The Quant

By Jack Forehand, CFA I have always thought I am a better discretionary investor than I am. I think I can predict where the market is headed. I think I know which investing styles will work best going forward. When I look back at the current crisis, I am pretty convinced that I saw it coming and that I could have sold at the top and then bought back at the bottom. Of course, none… Read More

A Detailed Look at the Quality Factor

By Jack Forehand, CFA There is probably no investing factor that makes more sense to your average investor than quality. We all want to own great companies – think Apple, Microsoft, Google, JP Morgan. We love to invest in companies that consistently compound their earnings over time. And owning high quality, brand name businesses certainly makes you sound smarter at cocktail parties than owning cheap value stocks that many people think will never bounce back. It… Read More

The Balance Between What Is and What Should Be

I like it when things work out the way they should. It’s great when good things happen to people who deserve it. It’s great when the outcome of any situation is the one supported by the facts. It’s also great when logic and reason win out in the end.   When I came into the world of investing, I brought that mentality with me. Although I certainly recognized that reality can deviate from the way… Read More

The Case For Value Stocks

By Jack Forehand, CFA One of the biggest lessons I have learned in my investing career is the importance of being able to argue the other side of something I strongly believe in. Confirmation bias is one of the biggest enemies of successful investing. It leads us to seek out information that agrees with our position. It causes us to follow people who tell us what we want to hear. It makes us avoid those… Read More

The Misuse of Market Valuation

By Jack Forehand, CFA There is perhaps no piece of information that is more misused in equity investing than the valuation of the market. Whether someone has an agenda to show that the market is expensive, or that it is cheap, it is usually very easy to find data or a chart to prove their point.  Even for those who don’t have an agenda, it can be very easy to fall into the trap of misusing… Read More

A Look at Some Alternative Ways to Manage Risk

By Jack Forehand, CFA The 60/40 portfolio gets a bad rap. It seems like there is a new article or study every week talking about its weaknesses or outlining why it no longer makes sense in the current market environment. But despite all of this, it has just kept rolling along and doing exactly what it is supposed to do. Even with bond yields at very low absolute levels coming into this crisis and many… Read More

A Look at the Impact of COVID-19 on Value Investing

By Jack Forehand, CFA On the surface, value investing is pretty simple. As a value investor, I want to buy stocks at a discount. I want to look at a company’s price relative to what I think it is worth, and I want to build a basket of stocks where I think that discount is greatest. In theory, the calculation of what a company is worth is a complicated process that involves projecting its cash… Read More

A Letter to My Future Investing Self

By Jack Forehand (@practicalquant) Last Summer, I published an article where I wrote some letters to my former investing self. Investing is a lifelong learning process and we all make many mistakes along the way. My goal with that article, as I discussed in a recent podcast with Dr. Daniel Crosby, was to look at some of the challenging periods I have experienced in my investing career and to examine some of the lessons I… Read More