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In the confrontation between the stream and the rock, the stream always wins--not through strength but by perseverance.

H. Jackson Brown


Check Voicemail at Belmont University

Investment Reading

Quantitative Value Philosophy by Alpha Architect has five sequential steps to reduce the investment universe to conviction picks:

  1. Identify Investable Universe: Our universe generally consists of mid- to large-capitalization U.S. exchange-traded stocks.
  2. Forensic Accounting Screens: We conduct financial statement analysis with statistical models to avoid firms at risk for financial distress or financial statement manipulation.
  3. Valuation Screens: We screen for stocks with low enterprise values relative to operating earnings.
  4. Quality Screens: We rank the cheapest stocks on their long-term business fundamentals and current financial strength.
  5. Investment with Conviction: We seek to invest in a concentrated portfolio of the cheapest, highest quality value stocks. This form of investing is by definition contrarian, and requires disciplined commitment, as well as a thorough understanding of its theoretical and intellectual underpinnings.

Looks like an interesting article - although the implementation details and calculations are in a book on Amazon.

Some calculation ideas are obvious, such as the CFO/NI ratio where higher ratios indicate higher quality income, i.e. fewer accrual driven earnings. CFO = cash flow from operations

Another measure of forensic accounting is financial distress.

Valuation metrics:

  • P/E – Price-to-Earnings
  • TEV/EBITDA – Enterprise Multiple = total enterprise value / EBITDA (the author's best-performing valuation metric)
  • FCF/TEV – Free Cash Flow Yield
  • GP/TEV – Gross Profits Yield
  • P/B – Price-to-Book

Measurement of financial strength: Piotroski’s F-SCORE

A summation of the alpha architect approach: The evidence was pretty clear: never buy expensive stocks (Value) and ride winners and cut losers (Momentum) Links to discussion: Value and Momentum

Automation of simple tasks through technology tools or apps

Amazon Mechanical Turk Ask workers to complete HITs - Human Intelligence Tasks - and get results using Mechanical Turk.

Best of PhD Comics

Saturated Fat research / writing

I will persist until I succeed.
Always will I take another step. If that is of no avail I will take another, and yet another. In truth, one step at a time is not too difficult. I know that small attempts, repeated, will complete any undertaking.

Og Mandino

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