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

The Case Against Value Stocks

Confirmation bias is one of the biggest problems in investing. We all have a set of core beliefs, and we tend to surround ourselves with people who also believe them and focus on information that validates them. But it is important to understand the other side. In this issue, we take a look at the argument against value investing.


Validea Hot List

The Challenges of Multi Factor Investing

An investment strategy based on well-tested factors like value, momentum and quality has worked for some of Wall Street's most famous investors, but history also shows taken one at a time each can seriously underperform the market for an extended time. There is a way to smooth out the returns of any individual factor by combining them into a multi-factor portfolio, which reduces risk and can produce comparable returns. But it can be a complicated process. In this issue, we look at the challenges of building multi-factor portfolios.


Validea Hot List

The Hazards of Timing Factors

One of the first things investors learn is to buy low and sell high. It applies to simple stock investing and it's tempting to think it can be applied to factor investing, too. Cheap value stocks should, in theory, eventually rebound. So it makes sense to buy them up and wait it out. It equally makes sense to pare back exposure to factors that have had a long period of significant outperformance, like growth and momentum stocks. But this simple idea is easier said than done.


Validea Hot List

A Look at Behavior in Investing

Humans approach investing with their own biases and behaviors than can hinder their success. The study of behavioral finance has blossomed in recent years as experts try to find ways to help investors overcome this natural tendency. What the discipline has discovered is that human behavior hurts investor returns more than other outside factors.


Validea Hot List

Learning from the Hierarchy of Investor Needs

With investing, certain skills have to be mastered first. They become the foundation for other skills that, taken as a whole, become the guidepost for investors to understand what is important and where they should be spending their time and energy. This hierarchy of investor interests puts investor behavior at the bottom of a pyramid.


Validea Hot List

When Hypothetical Becomes Real

Do you have what it takes to become a long-term factor-based investor? There are a few things you may not have considered. It's a lot tougher than it looks on paper, for starters. Deciding to dive in is not a quick process, of course. It takes research and an examination of long-term historical results.


Validea Hot List

The Underappreciated Role of Luck in Investing

Investing success is largely a function of skill and discipline. But luck also plays a role in investing. This role is often misunderstood and underappreciated. Luck is something even Warren Buffett has talked about, though most of his life has been spent carefully evaluating company fundamentals and sticking to a disciplined, unemotional approach to investing.


Validea Hot List

Stay Skeptical About Sure-Thing Indicators

Investors like simple indicators. They like things that tell them exactly when to sell, and when to buy. They want a magic bullet that can keep them out of market declines. The problem, of course, is it doesn't exist.


Validea Hot List

The Challenges of Timing the Market Like the Pros

The recent market upheaval has many people turning to market legends for advice, and it's easy to see why. These famous investors have made their names successfully navigating the markets over the long-term, and have survived many declines over that time. But that approach can be dangerous.


Validea Hot List

The Trouble with Back Testing

It's well-known that investment managers struggle to keep up with the indexes a lot of the time. Somewhere between 80% and 90% of active managers fall short over the long term after fees are paid. Performance metrics are all the more complicated by testing scenarios from the past. The idea is that this back testing can lead to positive future results by weeding out the bad strategies. But that assumes nothing ever changes, which is almost never the case.


Validea Hot List

When the Other Side Gets it Right

It's fair to say that a lot of us have been taking sides lately, digging in with our world views and unable to see how those who think differently could justify their view. Polarization and extremes are the new normal. But being able to see both sides is a crucial skill when it comes to picking stocks.


Validea Hot List

The Dangers of Headline Investing

As investors, we have plenty of noise to deal with day in and day out. Among the most difficult to avoid are the headlines screaming out the latest investing ideas. Even though the evidence shows investing by the headlines isn't a great idea, there are plenty of distractions to steer investors to the wrong path.


Validea Hot List

Knowing When Your Investment Process Has Failed

There's a paradox in investing where a flawed process can work in the short term but a well-considered process will break down. The trick is in figuring out whether your process is truly flawed or only temporarily held back by fleeting circumstances. And there does come a time when you may have to shift gears because a once successful process is no longer working.


Validea Hot List

The Ups and the Downs of Avoiding Value Traps

The problem with value investing, other than that it can go through long periods of underperformance as the strategy has suffered under lately, is that some stocks are cheap for a reason. It's not that they are hidden or overlooked gems just waiting to be discovered. It's that there is something fundamentally flawed. The trick, of course, is figuring out whether you have a bargain or a dud.


Validea Hot List

Process, Not Politics

The coming period will thus be dangerous for many investors, who have been lulled into complacency during an unprecedented decade-long bull run that seems to have no end in sight. The danger, rather, is that every day the bull market continues, those investors will be more and more tempted to pile in in a "fear of missing out" frenzy. And if they do bail and markets do fall, they will be tempted to stay on the sidelines far longer than they should, missing out on a major portion of the rebound. Read our latest issue to see how to focus on process and combat these emotional reactions.


Validea Hot List

Mentally Preparing For the Next Bear Market

Hoping for the best but preparing for the worst is a good rule-of-thumb, a maxim that can help us stay measured and mindful when it comes to dealing with life's inevitable ups and downs. But it can be hard to think about potential downs when the ups have been around for a while--and the current, nearly nine-year-old bull market is a perfect example of that.


Validea Hot List

Common Mistakes in Factor Investing

Most investors hate admitting mistakes, but those are often the most valuable lessons. Even the world's savviest of investors make them. Avoiding mistakes is not possible in investing. Learning from your mistakes is the key to long-term success.


Validea Hot List

Don't Give Up On Value Just Yet

Value investors have reason to be impatient. Growth stocks have been clobbering value stocks for some time, and this prolonged bull market and growth stock rally has left even jaded professionals wondering whether the game has completely changed. Despite tech stocks' dazzling performance giving growth stocks a good name these days, it is value stocks that consistently win over a far longer period of time.


Validea Hot List

The Difference Between What Sells and What Works

There is a disconnect in the asset management industry. The products that are the most effective at drawing in new investors are not the products that produce the best investor returns. In this issue, we take a look at some advertising tricks you should keep an eye out for.


Validea Hot List

How to Keep Investing Perspective

Learning how to tune out the noise and focus on what matters is the biggest challenge in investing. Investors have to overcome the temptation to dwell on the short-term when it's the long-term view that matters. They have to have the discipline to stick to a strategy even if it appears to be faltering at the moment. Success comes with setting clear goals and tuning out the distractions.


Validea Hot List

What Gambling Can Teach Us About Process

One of the biggest mistakes investors make is valuing outcome over process, particularly giving significant weight to outcomes over short periods of time. When an investment manager does well over one, three, or five-year periods, investors flock to them and their assets under management rise. But things almost always end badly for those performance chasing investors.


Validea Hot List

The Role of Inconsistency in Outperformance

No investment model can beat the market every year. We have studied many factor-based investment models and one rule applies to every one of them. Inconsistency is what investors have to endure in the short run to beat the market over the longer term.


Validea Hot List

Graham's Most Important Contribution

Many consider the value approach to picking stocks Benjamin Graham's most important contribution to investing, but in actuality it may be something different entirely. Check out our latest newsletter to see what Graham's biggest lesson was.


Validea Hot List

Become an Equity Compounder like Buffett

It's a simple concept, but over time, it accomplishes extraordinary things. That's how legendary investor and stock market guru Warren Buffett has described compound interest, a concept that Albert Einstein called the "eighth wonder of the world."


Validea Hot List

Lessons from Buffett's Annual Letter

Warren Buffett's annual letter to shareholders is an opportunity for investors to remind themselves of some valuable lessons. This year's letter contained insights on whether Buffett is seeing value in the market, on update on his bet that the S&P 500 would outperform a basket of hedge funds, and his views on the use of leverage. Our latest newsletter offers our take on the most valuable lessons from the letter.