Finding a Hidden Gem is Harder Than You Think

Since its 1990’s beginnings as an online bookseller, Amazon has grown into a behemoth that has “irreversibly changed the way consumers shop for everyday goods and read and watch media and entertainment,” writes Validea CEO John Reese in a recent article for Nasdaq. But scoring a hidden gem like Amazon early on, says Reese, is no easy task. “More often than not,” he writes, “investors who carefully select stocks of strong companies and diversify their portfolios across a wide range of securities are going to make money, but not make it rich on those investments alone.” According to research conducted […]

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 […]

Validea Hot List Newsletter: Spotlight on Guru John Neff

In our most recent Validea Hot List newsletter, we highlight the investment philosophy of John Neff, who managed the Vanguard Windsor Fund from 1964 to 1995 (during which time the fund averaged a 13.7 percent return versus the S&P 500’s 10.6 percent). Neff’s strategy focused on the price-earnings ratio as a gauge of investor expectations for a company’s future growth—an important factor according to this market guru. We explain the Neff methodology, founded on the notion that “high-flying growth stocks with high P/Es were very sensitive to any disappointment compared to expectations,” while he found low P/E stocks to have […]

Sensible Stock Picks Based on Fundamentals

While some forms of stock picking can be risky, choosing stocks based on proven strategies and underlying fundamentals can “increase an investor’s odds of enjoying outperformance over time,” writes Validea CEO John Reese in a recent Forbes article. Reese explains that stock picking resides on a continuum comprised of varying approaches and combinations of approaches. He describes the philosophy of Benjamin Graham, the legendary investor and mentor to Warren Buffett who is widely viewed as “The Father of Value Investing,” and how his fundamentals-based investment strategy formed the basis for some of the stock screening models Reese developed. Using these […]

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 […]