Dear Fellow Investor
We honestly didn't think it would work as well.
- In 2010 the newsletter tracked the index as the portfolio was started.
- In 2011 during the sovereign debt crisis the newsletter gave up a bit of outperformance.
- In 2012 the value subscribers invested in was finally recognised and outperformance really took off.
For the year to date the newsletter has outperformed the STOXX 600 index (incl...[more]
Over the course of the last decades, the analysis of structural reasons for equity out- or underperformance has been a widely discusses academic topic. New explanatory factors, such as accruals (Sloan, 1996), were established and former explanatory factors lost some of their predictive power, as Fama and French (2003) show in the case of beta.
One of the more recent explanatory factors is the F-Score (Piotroski, 2000), which has strong practical utility in separating winners from losers in the value segment of the market. In his paper, our friend Jan Mohr provides evidence on the utility of F-Score in the growth segment of the market. This study was done in collaboration with MFIE...[more]
In response to many questions from the Short Selling Blog:
The screen that featured in the article can be described as follows:
US companies with market capitalisation greater than one billion dollars and with 20 day average trading volume greater than 100,000 shares. These companies are less volatile than their smaller brethren and much more likely to be borrowable. ADRs are excluded. This gives a typical starting universe of about 1700 large, liquid US-based companies.
Then a 5 year earnings yield (EY5) is found for each...[more]
Many professionals sell short a stock in order to make a profit just as they do with their long portfolios. However, that is not the primary focus of our short portfolio.
Because the market (eg a long tracker) gives you 6+% per annum (if you stay in it long enough), a short portfolio has to generate 6+% excess return just to break even. And that is not including trading expenses, which are greater for short selling than normal long trading. That is quite a headwind to sail against!
On the plus side, because most equity investors are long only, there may be more mispricing opportunities to take advantage of...[more]