Visualizing Factors & Themes — What You See is What You Get

Categories Insight, OSAM Research, Value, Yield

“Is there a point where index funds theoretically can’t work a course?” asked Charlie Munger at this year’s Daily Journal Corporation Annual Meeting.1 “If everybody bought nothing but index funds, the whole world wouldn’t work as people expect.”

We agree.
So to help animate Munger’s premonition in real-time (see the cheery motion graphics below), our Team’s Developer / Performance Analyst)2 rolled up his coding sleeves and hacked into our “Factor Style Grid”.  Continue reading “Visualizing Factors & Themes — What You See is What You Get”

OSAM Guide to Factor AlphaSM

Categories Author: Ehren Stanhope, Investing, Market Cap, Momentum, Quality, Value, Yield

BACKGROUND: We invest deeply in our in-house research, trading, and technology platforms and 100% of the research feeding our investment process is conducted internally. In most cases, our exhaustive study of fundamental investment characteristics leads us to redefine industry-standard metrics at the most granular level in order to boost the accuracy and strength of the signal. We’re fortunate to have a core team of Researchers & Technologists who all share a passion for, and background in, factor-based investing (visit our Blog archives for more background). As a result, OSAM is a living, breathing, evolving, team-based research project. This Guide is an overview of our findings. Continue reading “OSAM Guide to Factor AlphaSM

A Factor Investor’s Perspective
on the Economic Cycle

Categories Author: Ehren Stanhope, Investing, Momentum, Quality, Value

diagram

“If you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes.”

— Peter Lynch

Though unpredictable, the economic cycle has significant implications for investors. Given the vast amount of evidence that certain themes consistently outperform — and underperform — throughout the cycle, an allocation to passive market cap-weighted indexes almost seems naive. Continue reading “A Factor Investor’s Perspective
on the Economic Cycle”

Alpha or Assets?

Categories Author: Patrick O'Shaughnessy, Investing, Market Cap, Value

“Financial markets lend themselves to initially self-reinforcing but eventually self-defeating processes.”

— George Soros

More and more investors are buying “factor”-based strategies, which invest using measures like valuation and low volatility. However, the most popular strategies are applying factors the wrong way. We believe that strategies should be built for alpha, not scale — but the asset management industry has gone in the opposite direction.  Continue reading “Alpha or Assets?”

Small Cap Equities — Inefficient & Opportune
(Part 2 of 2)

Categories Author: Chris Meredith, Author: Ehren Stanhope, Investing, U.S., Value

(Part 1 linked here)

Avoid Value Traps via a Quality Overlay

Not every cheap stock outperforms. Even within the cheapest decile of value, there is wide dispersion in underlying stock returns. Certain stocks are cheap for a reason: value traps. Continue reading “Small Cap Equities — Inefficient & Opportune
(Part 2 of 2)”

Small Cap Equities — Inefficient & Opportune
(Part 1 of 2)

Categories Author: Chris Meredith, Author: Ehren Stanhope, Investing, U.S., Value

Small cap equities1 are generally misunderstood and underappreciated. We believe they present a phenomenal total return opportunity for discerning long-term investors. The construction of common small cap indices and the nuances of the small cap universe favor an active approach. Continue reading “Small Cap Equities — Inefficient & Opportune
(Part 1 of 2)”

Fundamental Relationships have Changed in QE’s Wake

Categories Author: Ehren Stanhope, Investing, U.S., Value, Yield

“When the facts change, I change my mind. What do you do, sir?”

— Attributed to John Maynard Keynes (1883-1946)

I read a lot of market commentary. There are a lot of doomsayers out there. While I can’t argue with the fact that valuations are higher than they were at the market lows in 2009, the calls for a calamitous decline based on valuation seem overblown. Valuation tends not to be a good predictor of bear markets. Continue reading “Fundamental Relationships have Changed in QE’s Wake”

Factor Alpha & International Investing: Part 4 (of 4)

Categories International, Investing, Momentum, OSAM Research, Value

(This is the fourth in a series of four posts that examine the efficacy of factor-based investing in the International market.)

Active Management Landscape  Continue reading “Factor Alpha & International Investing: Part 4 (of 4)”

Buyback Bulls & Bears

Categories Author: Chris Meredith, Investing, OSAM Research, U.S., Value

A lot of attention has been paid to share repurchases recently, which makes sense given the amount of money involved. As of June 30, 2016, there had been almost $450 billion net transferred from companies to shareholders over the trailing twelve months through repurchase programs, very close to the all-time high in March of 2008. Transferring that much wealth between stakeholders will garner attention, and not all of it is positive.  Continue reading “Buyback Bulls & Bears”