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Inside the World of Pod Shops | Bob Elliott – Validea's Guru Investor Blog
In this episode of Excess Returns, hosts Justin and Matt sit down with Bob Elliott, founder of Unlimited Funds, to explore the fascinating world of multi-strategy hedge funds, also known as “pod shops.” Bob breaks down how these complex investment vehicles work, discussing their unique structure where multiple portfolio managers operate independently while sharing infrastructure and risk management resources. The conversation covers crucial topics including: Drawing from his extensive experience in the hedge fund industry,… Read More
Validea's Top Benjamin Graham Stocks - December 2024 – Validea's Guru Investor Blog
Benjamin Graham, the father of value investing, crafted a disciplined framework for discovering stocks trading below their true worth. Building on Graham’s foundational principles, Validea developed a systematic approach that emphasizes companies with proven financial health rather than those promising speculative returns. The strategy evaluates potential investments through several key lenses: First, companies must demonstrate fundamental strength. This includes generating substantial revenue of at least $340 million annually and showing consistent profitability over five straight… Read More
Practical Lessons from Andy Constan | Bridgewater, Macro Pillars and Navigating Deleveragings – Validea's Guru Investor Blog
Join Matt Zeigler and Jack Forehand as they break down some of the most insightful frameworks from our interviews with macro thinker Andy Constan. Drawing from multiple conversations with Andy, they explore: Andy’s ability to break down complex topics into simple, actionable frameworks has made him one of the most valuable voices in macro investing. Whether you’re a professional investor or managing your personal portfolio, this episode offers important insights into how to think about… Read More
Warren Buffett and Peter Lynch's Investment Wisdom Combined: Four Stocks That Pass Their Tests – Validea's Guru Investor Blog
Warren Buffett and Peter Lynch stand as two of investing’s most legendary figures, each with distinct approaches to identifying exceptional companies. Through Validea’s guru-based models, four stocks currently demonstrate the fundamental characteristics that would attract both the Oracle of Omaha and the mutual fund maestro. Let’s examine why these companies align with both investors’ stringent criteria. The Buffett Approach: Seeking Durable Competitive Advantages Warren Buffett seeks companies with predictable earnings growth and high returns on… Read More
Dispelling Big Investing Myths | Dan Rasmussen – Validea's Guru Investor Blog
In this episode of Excess Returns, Jack Forehand and Justin Carbonneau sit down with Dan Rasmussen from Verdad Advisers to discuss his firm’s top research pieces from the past year. They explore several fascinating market insights, including: Dan also announces his upcoming book “The Humble Investor” which challenges common assumptions about predictability in markets. Throughout the conversation, he offers thought-provoking perspectives on market efficiency, the limitations of forecasting, and why humility is crucial for investment… Read More
Validea's Top Ten High Shareholder Yield Stocks - December 2024 – Validea's Guru Investor Blog
Shareholder yield represents the total value a company delivers to its investors, calculated as a percentage of its market value. This comprehensive metric encompasses three distinct components: Why Shareholder Yield Matters Shareholder yield has become an increasingly important metric for investors for several key reasons: Here are Validea’s top 10 high shareholder yield stocks for December 2024. These stocks not only have high shareholder yields,but also score highly according to our quantitative models based on… Read More
Validea's Market Valuation Report | December 2024 – Validea's Guru Investor Blog
Here is the latest update for December from Validea’s market valuation tool. Rather than focusing on market-cap weighted indexes like the S&P 500, our tool focuses on the valuation of the average stock relative to history. We use the median of our investable universe of 2700 stocks to perform the calculation. Despite the market’s run in December, the median stock’s valuation remained fairly steady Using the current year PE Ratio, stocks look more expensive. They… Read More
Validea's Top 10 Russell 2000 Stocks - December 2024 – Validea's Guru Investor Blog
Despite lagging behind in market performance, smaller companies’ underlying business strength remains solid. This disconnect has created numerous investment opportunities among smaller companies that often get overlooked in favor of well-known large companies. At Validea, we evaluate stocks using 22 different quantitative models. These models are derived from the investment approaches of legendary investors like Warren Buffett and Peter Lynch, as well as proven academic research. By applying these rigorous criteria, we aim to identify… Read More
10 Great Investors Share Their Most Important Lesson – Validea's Guru Investor Blog
We ask one question at the end of each of our episodes: Based on your experience in markets, if you could teach one lesson to your average investor, what would it be? In this episode, we discuss our favorite answers from our guests in 2024. Featuring insights from: Learn why the fundamentals of investing often matter more than complex strategies, how to avoid common behavioral pitfalls, and why getting the basics right can put you… Read More
Validea's Top 10 NASDAQ 100 Stocks - December 2024 – Validea's Guru Investor Blog
Despite the NASDAQ 100’s remarkable performance and dominance among major market indexes, questions have emerged about potential overvaluation, particularly given its concentration in growth companies. However, thorough quantitative analysis suggests there may still be fundamentally sound stocks within this tech-heavy index. Using a sophisticated screening system that incorporates 22 different investment strategies – modeled after legendary investors like Warren Buffett and Peter Lynch, as well as proven academic research – Validea has identified several NASDAQ… Read More
Why Most Investors Won't Buy the Best Diversifier | Andrew Beer on Managed Futures – Validea's Guru Investor Blog
In this episode of Excess Returns, hosts Justin and Jack sit down with Andrew Beer of Dynamic Beta Investments to explore the fascinating world of managed futures and alternative investment strategies. Andrew, who manages over a billion dollars in assets, shares valuable insights on why managed futures remain underutilized despite their proven benefits for portfolio diversification. Andrew also discusses the evolution of the ETF landscape, the role of artificial intelligence in investment management, and why… Read More
Validea's Top Ten Warren Buffett Stocks - December 2024 – Validea's Guru Investor Blog
The Patient Investor approach takes inspiration from Warren Buffett’s investment philosophy, drawing from insights shared in Mary Buffett’s Buffettology. This methodology focuses on identifying companies with enduring value, much like Buffett’s own investment style. Key criteria include companies demonstrating: For December 2024, we’ve identified our top ten qualifying stocks. They are in the table below. Of note since last month is Lululemon and Williams Sonoma falling from 100% scores and Kinsale Capital and LPL Financial… Read More
A Rare Stock That Meets the Tests of Buffett, Greenblatt and Lynch – Validea's Guru Investor Blog
It is very rare feat, homebuilder NVR Inc. (NYSE: NVR) has achieved something unusual – simultaneously passing the strict criteria fundamental of three legendary investors: Warren Buffett, Joel Greenblatt, and Peter Lynch. This construction services company demonstrates impressive characteristics that align with multiple value investing philosophies. Warren Buffett’s Patient Investor Strategy (100% Score) The Buffett strategy, based on the principles outlined in “Buffettology,” emphasizes long-term value and durable competitive advantages. NVR excels across multiple Buffett… Read More
Practical Lessons from Ben Carlson – Validea's Guru Investor Blog
In this episode of Two Quants and a Financial Planner, we explore the timeless investing wisdom of Ben Carlson. We break down several crucial investing concepts, including why investors shouldn’t blindly follow billionaires’ market moves, the importance of finding an investment strategy you can stick with, and why the market rarely operates at extremes despite what headlines might suggest. We examine why even successful professionals can struggle with overconfidence in investing, the challenges of benchmarking… Read More
The Most Misunderstood Bull Market Ever | Jim Paulsen – Validea's Guru Investor Blog
In this episode of Excess Returns, Jack Forehand and Justin Carbonneau sit down with veteran investment strategist Jim Paulsen to discuss the current market landscape and economic outlook. Paulsen, author of Paulson Perspectives on Substack, shares unique insights on why traditional recession indicators have failed, how Main Street sentiment impacts markets, and why he remains optimistic despite widespread pessimism. Key topics include: Drawing from over 40 years of market experience, Paulsen offers a data-driven yet… Read More
Validea's Top 10 Peter Lynch Stocks - November 2024 – Validea's Guru Investor Blog
Peter Lynch built his reputation managing Fidelity’s Magellan Fund, and Validea has developed a systematic approach based on his key principles. At its core, this strategy seeks companies offering growth at a reasonable price (GARP). The foundation of this approach is the Price-to-Earnings Growth (PEG) ratio – found by comparing a company’s P/E ratio to its earnings growth rate. When this number falls below 1.0, it suggests the stock could be undervalued given its growth… Read More
Validea's Top 10 Dividend Aristocrats - November 2024 – Validea's Guru Investor Blog
The S&P 500 includes a select group of companies known as Dividend Aristocrats, distinguished by their remarkable commitment to shareholder returns. To earn this title, a company must raise its dividend payments every year for at least 25 years straight. Currently, fewer than 70 companies have achieved this milestone, spanning industries from healthcare to consumer goods to industrial manufacturing. This long-term pattern of increasing dividends points to these companies’ underlying strength – they’ve maintained enough… Read More
What the Rise of Passive Investing Means for Your Portfolio | Special Guest: Dave Nadig – Validea's Guru Investor Blog
In this episode, Jack Forehand and Matt Zeigler dive deep into one of the most debated topics in modern finance with special guest Dave Nadig. This episode explores how passive investing has transformed markets, featuring insights from leading experts including Mike Green, Aswath Damodaran, Rick Ferri, Rob Arnott, and Cliff Asness. Key discussions: Whether you’re a market professional or retail investor, this conversation offers crucial insights into how passive investing is reshaping financial markets and… Read More
Validea's Top 10 Joel Greenblatt Magic Formula Stocks - November 2024 – Validea's Guru Investor Blog
Joel Greenblatt developed an elegantly straightforward yet powerful investment methodology known as the Magic Formula, detailed in “The Little Book That Beats the Market.” The strategy distills complex stock analysis into two essential components: What sets this formula apart is its systematic approach: companies are ranked using these two metrics, creating a quantitative method for identifying businesses that are both highly profitable and potentially undervalued. This dual focus helps investors target quality companies when they’re… Read More
Validea Trend Following Update: November 2024 – Validea's Guru Investor Blog
Below is our trend following update for November of 2024. Our trend following system uses multiple moving averages to identify the long-term trend in a variety of equity indexes, asset classes, sectors and investment styles. All but one of the major asset classes and equity indexes rare currently in uptrends. Commodities are the lone exception and has moved back into a downtrend. All sectors remain in uptrends according to our system. Across the value and… Read More
Bigger Extremes, Better Returns | Cliff Asness on the "Less Efficient Market Hypothesis" – Validea's Guru Investor Blog
In this episode of Excess Returns, we sit down with AQR founder Cliff Asness for a fascinating discussion about market efficiency, behavioral finance, and the future of quantitative investing. In this wide-ranging conversation, we explore Cliff’s recent paper “The Less Efficient Market Hypothesis” and discuss why markets might actually be becoming less efficient over time, despite advances in technology – a counterintuitive but compelling argument. We dig into how social media and constant connectivity might… Read More
The Six Most Controversial Takes from Excess Returns in 2024 – Validea's Guru Investor Blog
In this episode of Two Quants and a Financial Planner, Jack and Matt dive into some of the most controversial takes we’ve heard on Excess Returns in 2024. From Aswath Damodaran’s spicy thoughts on the Berkshire annual meeting (spoiler: he’s not a fan) to Cem Karsan’s mind-bending perspective on options being the “dog” rather than the “tail,” we’re breaking down six of the hottest takes from 2024. We explore everything from Meb Faber challenging the… Read More
The Magic of Simplicity: Joel Greenblatt's Two-Factor Investment Strategy – Validea's Guru Investor Blog
In a field where complexity often reigns supreme, Joel Greenblatt’s “Magic Formula” stands out for its remarkable simplicity. Using just two variables to select stocks, this approach has produced impressive returns while challenging conventional wisdom about what it takes to beat the market. The Formula Unveiled At its core, Greenblatt’s Magic Formula combines just two fundamental factors: The strategy ranks stocks on these two metrics and combines the rankings to find companies that are both… Read More
Research Paper Summary: "Migration" by Eugene Fama and Ken French – Validea's Guru Investor Blog
In a landmark paper titled “Migration,” finance luminaries Eugene Fama and Kenneth French uncover the dynamic mechanisms driving two of investing’s most studied phenomena: the small-cap and value premiums. Their findings challenge conventional wisdom and offer crucial insights for investors seeking to capture these return premiums. The Surprising Source of Small-Cap Outperformance The small-cap premium has long intrigued investors, but its true source may surprise many. Fama and French discover that the premium comes almost… Read More
Five Top Twin Momentum Stocks – Validea's Guru Investor Blog
The Twin Momentum strategy, based on research by Dashan Huang and his colleagues, represents an innovative approach to momentum investing that combines both fundamental and price momentum factors. This dual approach was found to generate significant outperformance compared to using either type of momentum in isolation. The Strategy’s Foundation The academic foundation for this strategy comes from Huang’s research, which demonstrated that combining fundamental momentum indicators with traditional price momentum could lead to enhanced returns… Read More
Validea's Value Spread Report: November 2024 – Validea's Guru Investor Blog
Here is the latest value spread update for November 2024 from Validea’s market valuation tool. Rather than focusing on market-cap weighted indexes like the S&P 500, our tool focuses on the valuation of the average stock relative to history. We use the median of our investable universe of 2700 stocks to perform the calculation. To compare value vs. growth, we look at the top decile of the cheapest stocks and compare it to the top… Read More
Validea's Top Benjamin Graham Stocks - November 2024 – Validea's Guru Investor Blog
Benjamin Graham, widely recognized as the pioneer of value investing, developed a methodical approach to identifying undervalued stocks. Validea has adapted Graham’s principles into a systematic strategy that prioritizes financial stability and proven performance over speculative growth. Investment Criteria: The strategy focuses on finding established companies with strong balance sheets, consistent profitability, and attractive valuations. By applying these strict criteria, investors aim to identify financially sound businesses trading below their intrinsic value, while maintaining a… Read More
Making Sense of Markets in a Post Election World | Grant Williams and Ben Hunt – Validea's Guru Investor Blog
In this special “Emergency Room” episode of Excess Returns, Matt Zeigler is joined by Ben Hunt and Grant Williams for a candid discussion of the 2024 post-election landscape and its implications for markets. The guests explore how trust, or lack thereof, shapes both political and market narratives, examining the transformation of capital markets into what they describe as a “political utility” where “number go up” has become the prevailing faith. Key topics include: This wide-ranging… Read More
Top 10 High Shareholder Yield Stocks - November 2024 – Validea's Guru Investor Blog
Shareholder yield is a financial metric that captures the total return a company provides to its shareholders, expressed as a percentage of its market value. It combines three key elements: Why Shareholder Yield Is Important Shareholder yield is valuable for several reasons: Here are Validea’s top 10 high shareholder yield stocks for November 2024. These stocks not only have high shareholder yields, but also score highly according to our quantitative models based on investing legends… Read More
Three Technology Dividend Aristocrats Warren Buffett Might Like – Validea's Guru Investor Blog
Dividend Aristocrats are an elite group of S&P 500 companies that have increased their dividend payments consistently for at least 25 consecutive years. These companies represent the gold standard for dividend reliability and corporate stability, making them attractive to income-focused investors seeking steady returns and lower volatility. The Technology Sector Exception While traditional Dividend Aristocrats must show 25+ years of dividend increases, the technology sector follows modified criteria. Given that many technology companies only began… Read More
Practical Lessons from Cullen Roche – Validea's Guru Investor Blog
In this episode, we look at the biggest lessons we have learned from Cullen Roche, one of our most frequent and insightful guests. We cover: Whether you’re an investor building a portfolio or someone wanting to understand how the financial system actually works, this conversation delivers clear insights from one of finance’s most practical thinkers. 🖥️ Watch on YouTube 🎧 Listen on Apple Podcasts 👂 Listen on Spotify
Five Lessons from Meb Faber – Validea's Guru Investor Blog
In a recent episode of the Excess Returns podcast, investment manager and researcher Meb Faber shared several thought-provoking insights about investing and wealth building. Here are five key takeaways from his discussion: 1. Rethinking Dividends Faber challenges the conventional wisdom around dividend investing, arguing that while dividends aren’t inherently bad, they shouldn’t be the primary focus of an investment strategy. He points out that dividends are essentially a value factor, and investors might be better… Read More
Validea's Market Valuation Report: November 2024 – Validea's Guru Investor Blog
Here is the latest update for November from Validea’s market valuation tool. Rather than focusing on market-cap weighted indexes like the S&P 500, our tool focuses on the valuation of the average stock relative to history. We use the median of our investable universe of 2700 stocks to perform the calculation. Despite the recent strong run in the market, the median stock in our database got less expensive in October as earnings have been coming… Read More
Martin Zweig: The Conservative Growth Master Who Built a Fortune Through Disciplined Investing – Validea's Guru Investor Blog
Martin Zweig may have owned one of the most expensive penthouses in Manhattan, but his path to wealth was paved with disciplined, methodical investing rather than risky speculation. Let’s examine how this legendary investor developed and executed his “conservative growth” strategy that produced market-beating returns for decades. Early Days of a Market Maven Zweig’s fascination with the stock market started early, when his uncle gifted him six shares of General Motors stock at age 13.… Read More
The Critical Importance of Process Over Outcomes in Investing – Validea's Guru Investor Blog
Investors always focus on outcomes when evaluating their success. But that approach has a major flaw. If that outcome wasn’t generated by a sound process, then it is likely the result of luck and also likely won’t be repeatable. Consider two contrasting scenarios that perfectly illustrate a crucial lesson for investors. The first involves a day trader who experienced remarkable success during the cryptocurrency boom of 2017. Over several months, this trader generated impressive returns… Read More
Making Money from Market Chaos | Inside the Volatility World with Kris Sidial – Validea's Guru Investor Blog
In this episode of Excess Returns, Jack Forehand and special guest host Brent Kochuba dive deep into the world of long volatility and tail risk strategies with Kris Sidial, founder of the Ambrus Group. Kris shares invaluable insights from his experience managing volatility-focused strategies and navigating major market events. 🔑 Key Topics Covered: Kris provides a fascinating glimpse into how vol traders operate during market stress events, explaining how these strategies aim to deliver explosive… Read More
Validea's Top NASDAQ 100 Stocks - November 2024 – Validea's Guru Investor Blog
The NASDAQ 100 has outperformed all the other major indexes for a long time now. Due to its strong run, and the fact that it is dominated by growth companies, many investors think that there aren’t too many fundamentally sound stocks left in the index. But our quantitative models are still seeing value in some names within the index. Validea’s guru system uses 22 quantitative strategies based on historically successful investors like Warren Buffett and… Read More
Could the Election Spark a Small-Cap Value Rally? Here are 5 Stocks That Could Benefit – Validea's Guru Investor Blog
With the election over and a Trump victory looking likely, small-cap stocks could be a major beneficiary. Not only are small-cap stocks cheap compared to their large-cap counterparts, but they also saw significant outperformance the last time Trump won. But not all small-cap stocks are equal. So we thought it would be a good time to look at the highest scoring small-cap stocks using Validea’s guru models, which are based on the strategies of legends… Read More
Practical Lessons from Tobias Carlisle | Value Investing, Buffett and the Importance of Survival – Validea's Guru Investor Blog
In this episode, we sit down for a deep dive into lessons from value investor Tobias Carlisle, exploring several key insights from our conversations with him over the years. In this Halloween-themed episode (complete with plenty of Reese’s cups), we break down Toby’s perspectives on what makes an ideal business, the critical importance of survival in investing, portfolio concentration vs diversification, and whether today’s tech giants can maintain their dominance. We cover how See’s Candy… Read More
The Contrarian's Guide: Inside David Dreman's Value Investment Strategy – Validea's Guru Investor Blog
David Dreman made his name and fortune by going against the crowd. As one of the pioneers of contrarian investing, he built an impressive track record by systematically targeting stocks that were out of favor with the market. Let’s explore how Dreman developed his contrarian approach and break down the key elements of his quantitative strategy. The Psychology Behind Contrarian Investing At the core of Dreman’s philosophy is his deep understanding of investor psychology. He… Read More