Finding Stocks Using the Investment Criteria of Great Investors

By John P. Reese — It’s the time of year when notebooks and pencils (okay, iPads and styluses) are replacing flip-flops and swimsuits. Go into any store and you’ll see all the trappings; every food item imaginable in snack-size packaging, backpacks, dorm room accoutrements, and a sea of organizational shelves, bags and boxes. Maybe it’s also a good time to evaluate how organized you are with respect to your investment portfolio. Do you have a solid, go-to approach that is aligned with your risk profile and future goals? Are you sticking to that approach no matter what you hear on […]

Piotroski and Book/Market-Based Investing

 In a recent article for Nasdaq, Validea CEO John Reese shares insights on quantitative investing and outlines the approach of Stanford University accounting professor Joesph Piotroski (a market guru that inspired one of the stock screening models Reese created for Validea). Piotroski, writes Reese, was a trailblazer in the investment approach, turning heads on Wall Street in 2000 with his research on unpopular companies with high book-market ratios (defined as total assets minus total liabilities divided by market capitalization). Reese offers an explanation of Piotroski’s approach and the metrics he used, as well as an overview of the Validea portfolio […]

Buffett, Bank of America, and Five Financials

Warren Buffett’s decision to exercise Berkshire Hathaway’s warrants to purchase 700 million shares of Bank of America common stock will make it the bank’s biggest shareholder, writes Validea CEO John Reese in a recent Forbes article. Reese provides an overview of Berkshire’s history with Bank of America, explaining that this transaction will be the company’s most profitable in the financial sector. He also underscores the fact that financials have become a “cornerstone of Berkshire Hathaway’s holdings.” Using the stock screening models he created based on the investment philosophy of Warren Buffett and other market gurus, Reese identified the following five […]

Keys to Success from Bogle, Buffett and Others

In a recent Forbes article, Validea CEO John Reese shared seven keys to investing success from such legends as Warren Buffett, Joel Greenblatt, Jack Bogle and Peter Lynch. Here are some highlights: Time is your friend—take advantage of compounding returns. Impulse is your enemy—emotional investing decisions are a bad idea. Basic arithmetic works—be mindful of transaction costs and fees. Stay the course—stick to your investment plan. Using his stock screening models, Reese identified the following high-scoring picks: ManpowerGroup (MAN), a provider of workforce solution and services, earns high marks for persistent growth in earnings-per-share and a favorable price-sales ratio. Nissan […]

Focus on the “Known Knowns” When Investing

Among the many parallels we can draw between life’s macro issues and the world of finance, perhaps one of the most compelling is the tendency for people to think they know more than they do. While this can be costly in any context, it can break the bank when mixed with investing. In the field of psychology, this tendency is known as the Dunning-Kruger effect, named after the Cornell University psychologists who studied it. David Dunning found that the main reason for such a bias was ignorance rather than arrogance–that is, that often people didn’t realize how much they didn’t […]

Specialization Key to Becoming a Successful Value Investor

Recent worries that market indexes have been skewed higher by a small number of tech companies have started to subside, according to a recent article by Validea CEO John Reese for The Globe and Mail. Reese cites comments by industry experts, including Robert Shiller, Wharton School professor Jeremy Siegel and GMO co-founder Jeremy Grantham, the consensus of which is that the market is not in danger of overheating and may continue to inch upward. “If these expectations become reality,” writes Reese, “It will become all the more important to hunt for value.” However, he argues, this becomes tougher as more […]

Four Cybersecurity Sector Picks

 This month’s widespread and destructive ransomware attack crippled thousands of businesses worldwide, writes Validea CEO John Reese in a recent article for TheStreet.com. Fortunately, the attack didn’t penetrate the U.S. to a great extent, Reese writes, but only thanks to a lucky catch by a British researcher. The level of preparedness in these situations, Reese says, is driven by a business’s expectations regarding what might happen. “This isn’t unlike the world of investing,” he says, because “expectations are often what drive investor behavior and, subsequently, shifts in share value.” Reese explains how Validea views a company’s fundamentals as a “springboard […]

Ken Fisher’s Price-to-Sales Ratio and Super Stock Picks

While investors and the media focus on a stock’s PE ratio, investing guru Kenneth Fisher affords more attention to the price-sales ratio as a valuation measure, writes Validea CEO John Reese in a recent Forbes article. Reese outlines the Fisher investment philosophy and related criteria that inspired one of his stock screening models. Using this model, Reese identifies the following five high-scoring picks: Steelcase (SCS) provides an integrated portfolio of furniture settings, user-centered technologies and interior architectural products. The company has a favorable price-to-sales ratio as well as long-term earnings-per-share growth. Manpower Group (MAN) is a provider of workforce solutions […]

Cautious Dividend Investing a Must

Given the historically low interest rate and return environment, investors hungry for yield have been gravitating toward dividend stocks, but the valuation advantage of this asset class has diminished. This according to an article in this week’s Forbes by Validea CEO John Reese. “Since yield no longer provides a reliable valuation tool” writes Reese, “investors in search of such dividends must be sure to use other metrics to gauge value.” He emphasizes the importance of evaluating a company’s fundamentals and identifies six high-dividend stocks (yields above 3%) that score well according to his guru-based screening models: United Microelectronics (UMC) is […]

Value-Based Picks for the Trump Rally

As the Trump rally continues and stock prices remain elevated, shopping for value stocks may not sound feasible, writes Validea CEO John Reese in this week’s Forbes. He points out, however, that whether or not the market is overbought “shouldn’t matter to a true value investor.” Reese discusses the strategy of value investing legend John Neff, who led the Windsor Fund from 1964 to 1995 and outperformed the market by an average of 3.1% per year. He outlines Neff’s approach and explains the metrics used and the rationale behind them, highlighting the fact that Validea’s Neff-inspired portfolio has outperformed the […]

On Becoming Warren Buffett and Some Fat-Pitch Picks

As explained by the legend himself in the recent HBO documentary “Becoming Warren Buffett”, the Oracle of Omaha stays within what he calls his “Circle of Competence” when investing. This according to a recent Forbes article by Validea CEO John Reese. This includes, writes Reese, “knowing what you know, and steering clear of what you don’t.” He quotes a comment Buffett offers in the film: “Having an edge is enormously important. With that, however, comes the onus of brushing off that which fails to serve you.” Reese recounts other anecdotes and quotes from the film that reinforce what we already […]

Warren Buffett on “Free Money ” Plus Four Picks

In one of his many interviews, Warren Buffett explained how the insurance industry offers the opportunity to “invest in other people’s money and keep all the earnings on those investments,” writes Validea CEO John Reese in TheStreet. The article discusses the evolution of Buffett’s penchant for the insurance business as well as the industry outlook. Using his guru-based stock screening models, Reese identifies four high-scoring, small-cap financial picks: INTL FCStone (INTL), a financial services company (market cap of $687 million) that provides advisory services and products, earns high marks for its price-sales ratio and relative strength (price performance compared to […]

Greenblatt’s Magic Formula-Worthy Picks

Most investors lack patience and don’t understand underperformance, which motivates them to abandon funds when performance dips—precisely the time they shouldn’t, says Joel Greenblatt, co-founder of Gotham Asset Management. In a recent Forbes article, Validea CEO John Reese explains the fundamentals of Greenblatt’s “Magic Formula,” which uses return-on-capital and earnings yield to identify good companies selling for bargain prices. Reese identified the top ten Magic Formula picks and, including the following four that also earn high marks from other guru strategies: Natural Health Trends (NHTC) is a direct-selling and e-commerce company that sells personal care, wellness and quality-of-life products. In […]

Holiday Season Stock Picks

Amid the continued swirl of political rhetoric and speculation about the likelihood and timing of a shoe dropping in the stock market, holiday sales prospects still look good. In an editor’s pick article for Friday’s TheStreet, Validea CEO John Reese discusses this season’s outlook and offers the following five stock picks that could make the ‘nice’ list: Apple (AAPL), maker of the Apple Watch, iPad, iPhone and Mac, among other technology products, earns high marks based on predictable and expanding earnings per share as well as favorable EPS growth. Average return on total capital over both the past three and 10 […]

Buffett’s Affinity for Insurance Stocks

Warren Buffett’s first investment foray into the insurance industry occurred with his purchase of National Indemnity Company in 1967, and his relationship with the sector has grown in spades over the years. In a recent article for Forbes, Validea CEO John Reese offers a brief history of the Oracle of Omaha’s trajectory and perspective on the insurance business and provides the following stocks that pass his guru-inspired screening models: Verisk Analytics (VRSK) is a data analytics provider serving customers in insurance, natural resources, health care, financial services, government and risk management. The company scores well due to its solid, stable […]