By Jack Forehand (@practicalquant) — No investing factor has been maligned more than the Price/Book in recent years. In a period where value in general has performed very poorly, the Price/Book has struggled more than any of the other common value factors. When you couple that with the fact that the Price/Book’s failure to account for intangible assets makes its validity questionable in a world where more than 80% of assets are intangible, you have a… Read More
If I asked you to name the greatest investor of all time, you would likely immediately think of Warren Buffett. And there is good reason for that. Buffett has put up 20% annual returns since 1965, which is about double what the market returned over the same period. If you didn’t name Buffett, you might think of Peter Lynch, which would be another good choice. Lynch steered the Magellan Fund to a 29% return from… Read More
By Jack Forehand, CFA (@practicalquant) Earlier this year, I wrote about the mechanics of value investing and the many decisions that go into building value portfolios. Many investors believe that all value-based strategies will produce similar performance. But in reality, the many portfolio construction decisions that value managers make, which I highlighted in the article, can lead to major differences both in their performance and in the ability of investors to stick with their strategies.… Read More
By Jack Forehand, CFA (@practicalquant) There might not be a more controversial topic right now in investing than stock buybacks. The debate over buybacks, which started out as a debate over their investment merits, has morphed into a political one that touches many of the controversial topics of our day such as income inequality and whether Wall Street continues to profit at the expense of average Americans. The negative press that buybacks have received has… Read More
By Jack Forehand, CFA (@practicalquant) There are many skills that can benefit you as an investor. Being smart is certainly an asset, although it can also get you in trouble if you don’t know your limitations. The ability to control your emotions is also a huge plus. But I think the most important skill may be the ability to think critically. Having a process you use to view the investing world through and following that… Read More
By Jack Forehand, CFA (@practicalquant) Factor timing is a pretty controversial topic in the quantitative investing world. On one hand, we are all taught that we should buy low and sell high, so it seems intuitive to add exposure to factors that are out of favor. But in reality, it isn’t that simple and factor timing is much more difficult than it would seem in theory. This issue has also divided some of the smartest… Read More
By Jack Forehand, CFA (@PracticalQuant) Active managers as a whole have always been pretty bad at their job. Depending on what data source you use and what time frame you look at, somewhere north of 80% of active equity managers underperform their benchmarks after fees over long periods of time. When building Validea, we’ve tried to key in on those individuals and strategies that have a long term record of success, but the number of… Read More
By Jack Forehand, CFA (@practicalquant) It is no secret that value investing strategies have struggled for a long time now. The extended period of underperformance has tested the patience of many value investors and has led some to abandon the approach entirely. Adding to the frustration have been the frequent calls from some well-known value investors that we are at or near the end of this period of underperformance and that value is about to… Read More
By Jack Forehand, CFA (@practicalquant) Never tends to be an overused word in investing. Don’t get me wrong, I am big believer that the past is often the best guide to the future. I think base rates are the best tool we have when trying to predict what will happen going forward. But relying on the fact that something has never happened in the past to predict that it will never happen in the future… Read More
By Jack Forehand, CFA (@practicalquant) Josh Brown of Ritholtz Wealth Management wrote an interesting article a month or so ago about how he invests his money and it got me thinking about how more investment bloggers should do the same thing. It is one thing to talk about the investing concepts you believe in, but the additional step of seeing how you put those concepts to work in practice can be valuable. So in that… Read More