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Earlier this week I did a Q&A withAbnormal Returns’ Tadas Viskanta about Deep Value. Tadas sees more finance and investing content than anyone else, so it’s always interesting to see what he takes away from a topic: Activist investing is all the rage today. However you correctly note that activists, like Carl Icahn, have been […]

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Since Joel Greenblatt’s introduction of the Magic Formula in the 2006 book “The Little Book That Beats The Market,” researchers have conducted a number of studies on the strategy and found it to be a market beater, both domestically and abroad. Greenblatt claims returns in the order of 30.8 percent per year against a market […]

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Which price ratio best identifies undervalued stocks? It’s a fraught question, dependent on various factors including the time period tested, and the market capitalization and industries under consideration, but I believe a consensus is emerging. The academic favorite remains book value-to-market capitalization (the inverse of price-to-book value). Fama and French maintain that it makes no difference which […]

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A Miscellany of Deep Value

Greenbackd turned two on 1 December. Over the last two years the site has racked up 526 posts; 2,224 real comments; and 35,898 spam comments (no kidding). One of the best things about living, breathing and writing about deep value for two years is that Greenbackd now contains a great trove of research (from both […]

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Yesterday’s post on LSV Asset Management’s performance reminded me of the practical difficulties of implementing many theoretically well-performed investment strategies. LSV Asset Management is an outgrowth of the research conducted by Josef Lakonishok, Andrei Shleifer, and Robert Vishny. They are perhaps best known for the Contrarian Investment, Extrapolation, and Risk paper, which, among other things, analyzed low price-to-book […]

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Insider Monkey has a great analysis of LSV Asset Management’s Value Equity Fund returns and alpha (LSVEX). LSV Asset Management is a quantitative value shop founded by Josef Lakonishok, Andrei Schleifer, and Robert Vishny, authors of the landmark 1994 Contrarian Investment, Extrapolation, and Risk paper, which is a favorite topic of mine (for more, see the archives on LSV […]

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In a post in late November last year, Testing the performance of price-to-book value, I set up a hypothetical equally-weighted portfolio of the cheapest price-to-book stocks with a positive P/E ratio discovered using the Google Screener, which I called the “Greenbackd Contrarian Value Portfolio”. The hypothetical portfolio is based on Josef Lakonishok, Andrei Shleifer, and Robert Vishny’s (“LSV”) Two-Dimensional […]

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Mean reversion is a favorite investment topic here on Greenbackd (see, for example, my posts on Mean reversion in earnings, Contrarian value investment and Lakonishok, Shleifer, and Vishny’s Contrarian Investment, Extrapolation, and Risk). The premise of contrarianism is mean reversion, which is the idea that stocks that have performed poorly in the past will perform better […]

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As I’ve discussed in the past, P/B and P/E are demonstratively useful as predictors of future stock returns, and more so when combined (see, for example, LSV’s Two-Dimensional Classifications). As Josef Lakonishok, Andrei Shleifer, and Robert Vishny showed in Contrarian Investment, Extrapolation, and Risk, within the set of firms whose B/M ratios are the highest (in other […]

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Aswath Damodaran, a Professor of Finance at the Stern School of Business, has an interesting post on his blog Musings on Markets, Transaction costs and beating the market. Damodaran’s thesis is that transaction costs – broadly defined to include brokerage commissions, spread and the “price impact” of trading (which I believe is an important issue […]

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