Hot List Newsletter

Most Recent Hot List Issues

3 most recent issues require subscription. Historical issues can be viewed free of charge.


Validea Hot List

Lynch Strategy Not Just Buy What You Know

When Peter Lynch took over as manager of Fidelity's Magellan Fund in 1977, fund holdings totaled approximately $20 million. During his tenure from 1977 to 1990, it generated returns averaging 29.2% per year compared to the S&P 500's 15.8%, making Lynch something of a legend. When he retired in 1990, the fund had grown to $14 billion, a 700-fold increase. But how he did it may surprise many people.


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Are Small-Caps Small Potatoes?

The small-cap universe doesn't hold the appeal it did in the wake of last year's presidential election, and large-cap growth names have resumed leadership of the market. But valuations and long-term prospects within the group could set it up for strong returns going forward.


Validea Hot List

The Book to Market Model of Joseph Piotroski

A market guru that inspired one of the stock screening models we use at Validea, Joseph Piotroski was a trailblazer in the realm of quantitative investing, although he flew largely under the investing world radar. In 2000 the accounting professor at Stanford University wrote an academic paper that took Wall Street by surprise and was pivotal in the evolution of quantitative investing.


Validea Hot List

Mid Year Portfolio Update

With the second quarter coming to an end, we take a look at what has been working for our guru models in 2017, and what hasn't. With value stocks trailing the market badly so far this year and large-cap growth names leading the way, our best performers have been strategies focused on momentum and models with significant holdings in International stocks.


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The Investing Strategy of John Neff

While relatively unknown outside Wall Street circles, John Neff earned guru investor status for his enviable track record while managing Vanguard's Windsor Fund. Neff focused on a stock's price-earnings ratio and considered the metric not only as a gauge for how much investors were willing to pay for every dollar of a company's earnings, but also as an indicator of the level of growth investors are expecting from a company in the future.


Validea Hot List

Quant Investing Still Requires Discipline

As big hedge funds continue to corral teams of computer engineers to develop quantitative strategies, the jury is still out as to whether it will pay off. The Validea system, while based largely on quantitative criteria, looks at fundamentals, choosing stocks that meet criteria based on a company's underlying strength and value. These fundamental strategies, while not perfect, are the ones that have the potential to work over time.


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Ken Fisher and the Price to Sales Ratio

As the second earnings season of the year winds down, we're reminded of how much investors and the media focus on a company's profits and a stock's price-earnings ratio, the ubiquitous share valuation measure. While P/E is indeed a key tool to use when evaluating whether a stock presents a good opportunity, investing guru and author Kenneth Fisher will tell you it definitely isn't the only measure worth considering.


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Expectations and Storytelling

Humans like to tell stories. But that can be a detriment to long-term performance in the stock market. As an investor, any 'feelings' you may have about a stock will help form expectations regarding the stock's performance. What's important to establish, however, is whether your feelings and expectations are based on hard data or on a narrative you've created.


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O'Shaughnessy's Warning Against Headline Investing

When it comes to buying stocks, it is essential for investors to value process over outcome, to understand the concrete facts about the stocks that they (or their fund manager) are choosing to purchase and the basis for their appeal. Underlying fundamentals, not headlines, lead to good investing decisions.


Validea Hot List

Good Times and the Contrarian Philosophy

While the Trump honeymoon is losing some of its glow as the nation questions his ability to push through his policy agenda, economic data reflects consumer optimism. This type of landscape, however, sets the stage for a cautionary tale with respect to stock performance. Historically, markets perform best not during times of economic prosperity but rather when the economy is improving despite diminished expectations.


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How Warren Buffett Looks at Market Valuation

Almost all metrics commonly used by investors make the current market look expensive. But one valuation tool favored by Warren Buffett paints a very different picture and shows the market may actually be cheap relative to other investment options.


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When Does It Make Sense To Sell a Stock?

For many investors, deciding when to buy a stock can be much easier than deciding when to sell it. But it doesn't have to be that way. Using a disciplined, emotion free approach can make selling a much easier and more successful process.


Validea Hot List

The Truth About Buffett's Technology Buys

One of Warren Buffett's long known rules is that he doesn't buy what he can't understand. And that rule applied to technology stocks for a very long time. But the positions he has taken in Apple and IBM in recent years appear to show a change in his thinking. Check out our latest newsletter to see what that might mean.


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Why Value Investors Need "Mental Toughness"

Buying low valuation stocks can reap rewards over long periods of time. It is important to understand, however, that buying value stocks doesn't work all the time. Value stocks, as group, can go through lengthy periods of underperformance, and the investor with the mental toughness to stick with the strategy stands the best chance of coming out a winner.


Validea Hot List

Taking a Look at the Meaning of Market Milestones

The Dow hitting 20,000 this week has many investors excited. But do milestones like that actually mean anything with respect to future returns? Read our latest issue to find out.


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Revisiting the Market's Current Valuation

With the current bull market continuing to run, we take this opportunity to take a step back and take a look at where we stand from a valuation perspective. In this issue, we analyze the market using a variety of valuation metrics including the Shiller PE, Tobin's Q, and Warren Buffett's favorite valuation indicator, market capitalization to GDP. We also look at how President elect Trump's economic policies may impact the market.


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Where Do the Market and Economy Go From Here

As we close out 2016, we take a look at the what the latest economic news tells us and how it may affect the market going forward. In addition, we feature a look at market-cap, equal and fundamental index weighting excerpted from our latest Globe and Mail article.


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Taking a Look Back at 2016

After a lackluster 2015, the stock market bounced back strongly in 2016 . But more importantly, there was a major change in market leadership, with small-caps and value stocks overtaking the large growth companies that dominated the two years before. Check out our latest issue to see which of our guru strategies led the way during the year.


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Thinking Like a Contrarian - A Look at the Strategy of David Dreman

David Dreman made a name for himself by doing the exact opposite of what most investors were doing. That type of approach can be difficult to follow and require a lot of patience, but it also pays big dividends in the long-term. Read our latest issue to find out more.


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The Problem With the Predictions of Experts

We are subject to expert advice all the time in our everyday lives. And the stock market offers potentially the greatest concentration of so called experts of any area. But are these experts right more than they are wrong? And can you make money following their predictions? Check out our latest issue to find out.


Validea Hot List

Examining the Value Strategy of the Great Benjamin Graham

The late Benjamin Graham may be the oldest of the gurus we follow, but his impact on the investing world has lasted for decades after his death in 1976. Despite being developed over 50 years ago, his investment strategy has continued to produce impressive results. Find out more about how Graham picked stocks in this week's issue.


Validea Hot List

Lessons From the Gurus

History shows that beating the market over time is incredibly difficult, with more than 80% of fund managers failing to accomplish that goal. But a select group of investors have done exactly that, and they form the foundation of our stock selection system. The latest Hot List issue takes an in depth look at who they are and why we follow them.


Validea Hot List

A Look at the Investment Strategy of Martin Zweig

Martin Zweig passed away in 2013, but his stock selection principles continue to endure. Our portfolio based on his book Winning on Wall Street has almost doubled the market's return since its inception in 2003. Zweig was a growth investor, and his methodology was dominated by earnings-based criteria. He looked at a stock's earnings from a myriad of angles, wanting to ensure that he was getting stocks that had been producing strong growth over the long haul and even better growth recently -- and he wanted their growth to be coming from the right sources.


Validea Hot List

Value and Momentum: Perfect Together

Value investing works - and so does momentum investing. Thus, combining the two factors makes for a viable strategy. Such a combination may prevent a value-only investor or a momentum-only investor from suffering through extended periods of underperformance. In this issue of the Hot List Newsletter, we examine the combination of value and momentum investing. We also rebalance the portfolio, adding four new stocks to the Hot List.


Validea Hot List

The Magic Formula: A Look at Joel Greenblatt's Simplistic Approach

Hedge fund manager Greenblatt's 2005 bestseller The Little Book That Beats The Market, lays out a way to beat the market using two -- and only two -- fundamental variables. The "Magic Formula," as he called it, produced back-tested returns of 30.8 percent per year from 1988 through 2004, more than doubling the S&P 500's 12.4 percent return during that time. Greenblatt also produced exceptional returns as managing partner at Gotham Capital, a New York City-based hedge fund he founded. The firm averaged a remarkable 40 percent annualized return over more than two decades.