The Little Stock That Beats The Market

Joel Greenblatt recently wrote an investment book titled "The Little Book That Beats The Market." It included a description of an investment strategy focusing on a magic formula with two inputs - high return on capital and a high earnings yield. The book is a great intro into factor based equity screening. Currently he owns four stocks - Wal...

NEW LOOK

When I first started blogging, I wanted to keep the topics separated on their own blogs. Since writing consistently on four separate blogs is a hassle (and readers have been requesting I consolidate), I'm moving them all to World Beta.From now on, I will tag the posts and readers can follow the topic specific posts by the Labels on...

Show Me Your Hand – Betting on the Smart Money

Last summer David Einhorn won $659,730 for placing 18th in the World Series of Poker. Thats a pretty nice take for most people, but Einhorn isn't most people. The 37-year old fund manager donated all of the proceeds to the Michael J. Fox Foundation for Parkinson's Research. Placing 18th out of over 8,000 entrants is an amazing accomplishment, but...

Multiples and Their Valuation Accuracy in European Equity Markets

I usually don't dip my toes into fundamental discussions here on World Beta, but this is a great paper, and I would be amiss to not repost it. Kudos to CXO for finding it...Multiples and Their Valuation Accuracy in European Equity Markets Abstract: In spite of their prevalent usage, accounting-based market multiples are...

Beating the Dow with Dogs, Flyers, Bonds, and Darlings

Michael O'Higgins placed his stamp on the investment world with his 1991 publication of the book "Beating the Dow". In the book he details a strategy he calls the High-Yield 10 which buys the 10 highest yielding Dow Jones Industrial Average Stocks - out of a potential 30 - and rebalances yearly. The strategy was labeled the "Dogs of...

When Congress goes to work, it’s time to sell. . .

Article at The Club For Growth"According to two economists, Mike Ferguson of the University of Cincinnati and Hugh Douglas Witte of the University of Missouri at Columbia (paper link here) , if you had invested $1 in the Dow Jones Industrial Average back in 1897 when the index first started and invested only when Congress was in or out...

Mean Reversion

In 2003, investors in global equities had just experienced 3 brutal years of negative returns. While many were too shell shocked to commit new (or in many cases, any) capital to the stock markets, this was precisely the best time to buy stocks. Baron Phillipe Rothschild once exclaimed that the time to buy was "when there is blood in...

Drawbacks of Simple Momentum

As a number of readers have pointed out, there are various drawbacks to the method/test I have presented here. The big ones are:1. Fixed measurement period. I used a simple one-month and one-year absolute measure, but it is possible that 3, 6, X months would work better (or a combination of measurement periods).2. Fixed holding period. This is the...

Does 1MO Work on Foreign Indices?

I take a look at the top 5 countries in the MSCI EAFE Index - UK, Japan, France, Switzerland, Germany, and Cash.Much better return with similar volatility (resulting in a higher Sharpe), and lower drawdown.No allowances made for commissions, slippage, taxes, etc.Equity Curves, log and non-log. . .

Volatility Gremlins

Readers have been emailing me about the returns of the models I have presented in the last few posts. Rather than respond to all of them individually, I thought I would just post the year by year returns for the S&P500, the 1-Year MO model, the 1-Month MO model, and a combo of the two models. Recall that no...