Herbalife (HLF): Is it a Fraud? Not likely.
Herbalife is currently a highly debated stock. On one side you have Bill Ackman claiming the firm is a ponzi scheme. On the other side [...]
Simple Models Beat Experts: Even in Investment!
One of the more fascinating findings from psychology research is the empirical finding that simple models often beat experts. In other words, insights from your [...]
Dividing Value into “Priced” and “Mispriced”
Gerakos and Linnainmaa have a new paper out: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2083166 and http://www.asb.unsw.edu.au/schools/bankingandfinance/Documents/J.Gerakos,%20J.T.%20Linnainmaa%20-%20The%20Unpriced%20Side%20of%20Value.pdf Here is code to perform the decomposition: http://faculty.chicagobooth.edu/juhani.linnainmaa/ValueDecomposition.do Summary Book-to-market (BE/ME) ratios explain variation [...]
Applied Quantitative Value (Part 4 of 4)
I sat down with Wes Gray--who also contributes frequently on this blog under the title Wesley Gray, Ph.D.--and Toby Carlisle--who runs the great blog over [...]
How to Identify High Quality Stocks, Continued (Part 3b of 4)
Suppose you had to sail across the Atlantic and were given a choice between making the crossing in either an 8 foot sailing dinghy, or [...]
How to Identify High Quality Stocks (Part 3a of 4)
What does it mean to measure a business’ “quality” in the context of investing in common stocks? We try to answer this question in Part [...]
How to Identify the Cheapest Stocks (Part 2 of 4)
This is the next installment in our series covering Turnkey Analyst’s approach to the holy grail of investing – how to identify low risk, high [...]
Managing the Risks of Permanent Capital Impairment (Part 1 of 4)
This post is the first in a series that will discuss Turnkey Analyst’s approach to finding the holy grail of quantitative finance – a robust, [...]
Quantitative Value vs. Magic Formula Stocks
Here is a quick screen comparison between our Quantitative Value (described here) and the Magic Formula (screen results from here): click to enlarge click to enlarge [...]
Calculating Value Portfolios–Why Details Matter
The Devil in HML's Details Cliff Asness and Andrea Frazzni http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2054749 Key Points: Using a more real-time estimate for book-to-market (B/M) matters. Alphas from using [...]
Do Cash-Adjusted P/E Ratios Work?
A guest speaker in my lecture last week mentioned something interesting: Apple looks like a growth stock on a P/E basis, but when you strip [...]
Valueinvestorsclub.com Performance Update
If you are unfamiliar with Valueinvestorsclub.com and you call yourself a "value investor," you've been missing out on the greatest value communities of all time. [...]
Dissecting Net-Net Returns over the past 6-months
Paul Sepulveda has an interesting guest post for us today. Paul dissects the recent performance of net-nets and identifies some interesting tidbits. Below I have [...]
Are stock pickers better than Computers?
Empiritrage has a detailed research piece on the question of whether or not quantitative value can beat fundamental stock-pickers. http://empiritrage.com/2012/03/24/man-vs-machine-quantitative-value-or-fundamental-value/ Here are a few highlights: [...]
Magic score: Long-Term vs. Short-Term
Security Analysis, by Graham and Dodd, is a classic text on value investing. We love it. And despite our outward "quant" appearance, everything thing we [...]
Magic Formula and MA Rules: A Bad Combo!
Recently, I've been investigating various risk management systems. A lot of the work we've done is beyond the scope of the blog and/or is related [...]
Shorting the Magic Formula
I just got back from the Value Investing Congress--http://www.valueinvestingcongress.com/. The event was exceptional and very thought-provoking. While Einhorn's annihilation of Green Mountain Coffee was impressive [...]
Thinking in terms of “Shareholder Yields” – Notes from the Underground
I recall that during my first job on Wall Street, my boss had me generate a page of “comps,” or comparable companies with summary statistics [...]
How to use the Fama French Model
The CAPM is prolific, but doesn't appear to work! In this blog, we discuss our views on how to use the Fama French model. (Note: [...]
Magic Formula and Small Caps–The Missing Link?
A reader recently commented in response to our study on the Magic Formula, which questions the 31% CAGR performance of the strategy over the 1988--2004 [...]