Tag Archives: Stocks

Quant stock investing vs smart beta strategies

Factor based investing has become quite popular these days. Factors are characteristics of a group of stocks, the most famous being value and small cap, that are used to sort the overall universe of stocks. For quite some time certain factors have been shown to outperform the overall market over extended periods of time. The finance industry has jumped all over this and now offers many off the shelf funds and ETFs that aim to invest in these factors and outperform the market. There are about 400 Smart Beta funds now, totaling about $400B in assets. No need to do … Continue reading

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Quant strategies: Q1 2016 performance

Here are the Q1 2016 total return and max drawdown numbers for the various quant strategies I track. For explanations of the various quant strategies see the portfolios page. All equity portfolios consist of 25 stocks and were formed at the end of 2015. No changes in the holdings since that time. In the table below I list various quant strategies along with their YTD performance and drawdowns. Also, listed are various benchmark indices. Overall, the start of 2016 is working quite well for the various quant strategies. The utility strategy is leading the pack with a huge Q1. Only the microcap … Continue reading

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Quantitative investing: enhanced yield system update

Time to update quant system #3 in my series. See my previous two posts for the first two system updates (here and here). Today I’ll update the enhanced dividend yield system which I originally posted on almost 2 years ago. Let’s dive right in. The enhanced dividend yield strategy originally appeared in What Works On Wall Street. In its original form its is a bit complicated to implement with an unequal weighting of the individual holdings. In my modified approach I use an equal weighting of the top 25 stocks. The strategy basically screens for large profitable popular dividend paying … Continue reading

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Quant investing: utilities value system update

In today’s post I’ll update the second quant investing system, the utilities sector value system. In my last post I updated the consumer staples value system. The utilities sector value system can be used on it’s own or combined in a portfolio with the consumer staples system. Lets get right to it. The utilities value system is somewhat more complicated than the consumer staples value system. It uses a composite value metric as I discussed in the original post on the system. The composite value metric is the average of P/E, P/B, P/S, P/FCF, EV/EBITDA, and SHY. In that post … Continue reading

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Quant investing: consumer staples value system update

I’ve received a fair amount of interest in providing an update to the quant portfolios I’ve presented on the blog in the past. For those trying to implement the portfolios themselves it can provide a good check on their implementations. For newbies, it is a good re-intro to the power of quant systems. In this post I’ll start with the consumer staples value system. I introduced the consumer staples value system in this post. It is one of the easiest quant systems to implement. It simply limits the stock universe to the consumer staples sector, ranks the stocks by shareholder … Continue reading

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Asset allocation vs security selection

Nice to be back to posting. San Diego has been so full of fun, friends, family, and amazing local beer, that my blogging definitely suffered… Is it even worth picking individual stocks? Even in quant portfolios? The more I delve into tactical asset allocation and it’s ease and benefits the more I’ve been asking myself this question. In this post I’m going to present some historical data that really brings this question to light. Then I’ll point you to some pretty amazing, yet complex research on this topic. The results may just lead you to give up any stock picking whatsoever … Continue reading

Posted in Portfolio, Quant Investing, TAA Investing | Tagged , , , , , , , | 22 Comments

What to do about poor future returns

There’s been a lot of chatter recently about asset valuations, in particular US stocks and US bonds, and their impact of future returns. This is nothing new. It just seems to get louder at the start of every new year. I’ve discussed this topic before on the blog. Last time here. Basically, my point was that we may indeed, in fact it’s probable, be facing poor future returns – a least for the next 10 years, but that doesn’t mean that the 4% SWR rule is dead. In fact the 4% SWR implies even worse returns than people are forecasting … Continue reading

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Quantitative investing – going global

One of the great things about learning how to do your own Quantitative screening is that once you’ve mastered the basics and learned how to implement popular screens you can then customize screens to fit your investment style, new ideas, etc… In this post I’ll take a look at how we can modify the basic O’Shaugnnessy Value Composite 2 and Trending Value screens  to look outside the US for stocks. The basics of implementing the O’Shaughnessy screens can be found in this post and the previous posts referenced there. The inspiration for this post comes from the apparent value in … Continue reading

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Fairfax Financial 2012 results update

It’s been a long time since I’ve written about Fairfax Financial. Last time was in October 2011 (see here for previous posts). Fairfax recently held their annual shareholder meeting which had some great information about the company, its results, and why it is a good investment. I’ll discuss some of the highlights of the meeting in this post. First, my investment thesis for Fairfax is pretty simple. Great long term returns, a super conservative and competent management team, and a leveraged but hedged investment. I’ll explain. In 27 years, Fairfax has generated a compound return of 23.3% a year on … Continue reading

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What’s next for MLPs?

For my first post back I want to update the last post I did before my hiatus. On Feb 10, I posted on how well the MLP sector did in January, with it being the second best January ever, and that good early year performance usually leads to strong results going forward. Lets see what the MLP sector has been up to since then. The chart below shows the performance of the AMJ ETF that tracks the MLP sector. What a year so far is all I can say! The MLP index total return for Q1 2013 was 19.7%, far … Continue reading

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