Factor Strategy Focus – Benjamin Graham

By Jack Forehand — When we started following guru-based models, the term factor investing didn’t exist. We just wanted to find a way to outperform the market, and we realized that only a very small group of investors had successfully done that – and we certainly weren’t in that group. So we decided to follow investors who had long-term records of beating the market and whose strategies could be quantified. We read their books and research papers to try to find out how they did it. We researched strategies by legendary investors like Warren Buffett, Ben Graham, and Peter Lynch, […]

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 […]

Columbia’s Bruce Greenwald on Value Investing

When Columbia professor Bruce Greenwald first arrived at the university, value investing wasn’t terribly popular, but he was convinced it was a much better approach. This according to a recent interview with Barron’s. Here are some highlights from the interview: “Specialization is an old and honorable Graham and Dodd tradition.” Greenwald references successful value investor Mario Gabelli, arguing how his specialties have served him well. “When you start out,” he says, “you want to have an industry focus.” He says this is the advice he gives his students. Value investing is about more than buying cheap stocks, according to Greenwald. “People […]

Francis Chou is a Patient Investor

Regarded as one of the savviest value investors in the world, says a recent article in Canadian Business, Francis Chou thinks the market is overpriced right now, but will come down–and he’s willing to wait. The article notes Chou’s early career as a Bell telephone technician (1979) during which time he became fascinated by the idea of value investing. Since then, the article says, Chou claims he’s been “doubling his money about every five and a half years.” A year after obtaining his CFA certification in 1985, he launched Chou Associates Management. In 2015, Barron’s named Chou one of the […]

Why Value Investors Need “Mental Toughness”  

At the end of the Super Bowl, a jubilant Tom Brady attributed the Patriot’s win to the “mental toughness” the team had demonstrated all year–which, no doubt, came in handy when they entered the fourth quarter trailing the Falcons by ten points. Unless we’re talking about basis points, things would be pretty dismal for any investor entering the fourth quarter down by ten. But the idea of mental toughness applies to investing as well as to football, whether it be for a day, month, quarter or, for that matter, a year. Value investing is a perfect example of this. We […]