26 Feb 2016

Is Value Investing Dead?

Value stocks are undoubtedly having a tough time these days.  As I first wrote last November (click here for the article), value stocks are undergoing their worst period of underperformance since the tech bubble during the late 1990s. For the 10 years ending January 31st, the Russell 1000 Value index is up 7.03 percent compared to 7.92 percent for the Russell 1000 index of large cap stocks and 8.68 percent… Read More

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16 Sep 2015

The Secret Sauce Behind Value and Momentum

One of the interesting market developments so far this year is the relative performance of momentum versus value in large cap stocks. Earlier this year, I wrote a primer on each strategy (found here and here) and at the end of the momentum article, I pointed out that value and momentum work especially well together. While both strategies have enjoyed higher returns than the overall market, they do so at different times, which… Read More

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29 May 2015

Finding the Best Ratio to Value Stocks

For a few years now, I’ve been pondering why academics always evaluate the cheapness or expensiveness of stocks based on the price-to-book (PB) measure.  Even more oddly, they call it book-to-market, but that’s a mystery that won’t be solved. In case it’s been a while since you’ve had an accounting class, the book value of a company is equal to the assets minus the liabilities, or equity of a company…. Read More

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14 Apr 2015

A Value Investing Primer

Value investing is perhaps the oldest and best-known investment strategy, which basically suggests that cheap stocks tend to outperform expensive ones. The strategy was first popularized by Benjamin Graham, teacher and mentor to Warren Buffett, who also co-wrote one of the most important books in finance, Security Analysis, with David Dodd in 1934. Graham introduced the idea that stocks have an ‘intrinsic’ value that can be roughly estimated with a… Read More

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26 Jan 2015

When a Strategy Stumbles

Last year was tough for some of our stock strategies. For example, we take a portion of our large cap portfolio and invest in ‘value’ stocks. Another, equally sized percentage is invested in a strategy that buys ‘momentum’ stocks. I’m going to oversimplify here, but value stocks can be thought of as ‘cheap’ stocks. For a stock to be cheap, the market value of a company has to be low… Read More

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9 Sep 2014

Value in the Modern World

I like old-timers. They have terrific knowledge, perspective and, above all, experience. I love hearing the war stories about how decisions were made, what succeeded and what failed and the people who were in the room. Over the weekend, I watched a rerun of WealthTrack on YouTube, a PBS show that features a reporter named Consuelo Mack interviewing many of the titans of finance. Most of them are from what… Read More

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