Forward Multiples vs. Future Returns

2024 Review

A Look at the Average Firm Size of Low and High US Momentum Buckets over Time

Understanding Systematic Value/Momentum (Facts, Opinions and Fairy Tales): I wanted to write a short piece trying to explain what happens in the background of my system, why I do what I do and what are the main differences between my approach and traditional value investing, deep value with a catalyst, GARP or a classic factor ETF.

Riding the Smallcap/Largecap Cycle: Smallcap investors currently have a hard time. Cycles and periods of underperformance can be long and debilitating. This short post aims to help you understanding past cycles and what might be next. To analyze the small/largecap cycle, I pulled the US Small-Minus (SMB) factor data from the

Which US portfolios did best during the begin of the great inflation (and a shameless introduction to my new web app): Thanks for reading Systematic Investing! Subscribe for free to receive new posts and support my work. Hello fellow investors, Yesterday I made my web app public under the link: https://ken-french-data-explorer.streamlit.app You might know portfoliovisualizer.com and similar sites which help you visualizing and analyzing existing strategies, ETFs, Stock and funds from different p

Don't Catch Falling Knives: Buying in the 52-week low list, looking for “bargains” based on bad recent stock price performance, winning by going against the crowd… Many investors have the deep contrarian desire to catch a falling knife and make a killing by nailing the turnaround. It worked in 2009 and now at the beginning of 2023. Buying the most bombed out stocks at the bottom of “brutal” market drawdowns was very lucrative. So should you do it?

Small Reminder: Don't turn your back on Smallcap Value now.: If you are either a) underinvested in Smallcap Value or b) you are overweight Smallcap Value since a while and you are disappointed and about to quit: This is a small reminder for you to stay the course. Reason 1: Value Spreads After a short victory for classic quantitative Value in 2022, we are back to craziness. With AI and megacap tech rallying again, it’s once again the oldschool Value investor who is looking the dumbest today. Wit

How would Cheap and Glamour Stocks have performed without multiple expansion?: How Cheap vs. Glamour seems to work Glamour had a few very good years and cheap stocks lagged the market. As a consequence, voices calling “Value” dead become louder again. I don’t like calling it Value and Growth by the way, since cheap stocks can be worthless Value Traps and expensive stocks can be Value Stocks in the sense of growth at a reasonable price (GARP). Thus, I will call it Cheap vs. Expensive (or Glamour)

Equal-Weighted vs. Cap-Weighted: In which Styles and Factors did it matter for CAGR?: There is always a big debate if you should look at factors in an equal-weighted construction or in a cap-weighted construction. Cap-weighted construction is the go-to for ETFs as it is more cost-efficient and basically self-adjusting. No rebalancing is needed, only reconstitution of the portfolio holdings based on the rules of the style, be it momentum, value or any other. On the other hand, most (more concentr

Global Smallcap Value Investing And The Question Of Regional Allocation: The Question In my last post, I looked at the impact of different regional allocation decisions on global smallcap momentum strategies and tried to draw conclusions from the analysis which could also be relevant for global stock picking based on momentum. Of course, timing regional momentum strategies based on their relative momentum seems kind of redundant at first. Also, I don’t even run a pure momentum strategy but a mul

Global Smallcap Momentum Investing And The Question Of Regional Allocation: The Question In my global ranking system, I often see that the regional allocation, especially between US and exUS varies widely depending on the current market environment. If momentum of broad regional markets fades or certain stock markets become expensive or cheap as a whole, a concentrated long-only approach without constraints will start to concentrate allocations in a certain country or continent.

OM2 Network - Japanese Meat on the Bones: I bought a position in the Japanese microcap OM2 network (7614:TSEJ). Before you continue reading, please remember that none of this is investment advice or a buy recommendation. I am invested in the stock based on purely quantitative investment approach. My position is small and part of a larger portfolio. Sudden changes in data can lead to sudden change of my opinion on the stock. Also, data can be wrong or outdated, especially in the microcap space. T

Random Idea from the Screener: Build-A-Bear Workshop : Build-A-Bear Workshop Build-A-Bear Workshop, Inc (headquartered in St. Louis, Missouri) is a multi-channel retailer of plush animals. The company was founded in 1997 and operates in the USA, UK, Canada, and internationally in the segments Direct-to-Consumer, Commercial, and International Franchising.

Can Long-only Industry Momentum Portfolios be improved by excluding certain industries?: After we looked at some industry-momentum decompositions and B&H strategies of cyclical, sensitive and defensive industries, I now asked myself: If we exclude certain “problematic” industries from the equation, could we even improve the returns of a momentum strategy?

Should you buy and hold cyclical, sensitive or defensive industries?: In my last post I looked at industry momentum portfolios and their composition. Even though many cyclical industries were frequently bought, the industry momentum portfolio outperformed the equal-weight benchmark of all industries. Today I want to look at a subcategorization of industries into three groups:

Should you invest in cyclical industries making new highs?: I often hear from modern value investors that they exclude cyclical industries from their procedure because a) they will always look optically cheap, especially at business cycle peaks and thus are common Value Traps,Thanks for reading Systematic Investing! Subscribe for free to receive new posts and support my work.

Portfolio Update April 2023 (explanations and excuses): In this post I want to give a short portfolio update, even though not much changed recently. Who knows my pinned tweets, maybe already followed some of the transitions and trades over the past few months. I want to summarize shortly what I have learned in 2022 and beyond.

Why I do DIY multifactor microcap investing #2 - Size: There are many reasons why most financial products, funds and portfolios are restricted to owning largecaps: Scalability (you can’t ram billions of dollars of AUM or personal wealth into a microcap portfolio due to friction, illiquidity, capacity and market impact; as a consequence, small- and microcaps are ignored or talked down, especially after a golden decade for largecaps like the one we just had)

Why I do DIY multifactor microcap investing #1 - Concentration: Factor ETFs can give you first exposure to Value, Quality, Size and Momentum. But is it enough? Most of these ETFs only give you a somewhat diluted factor experience since they contain 100s of stocks and are mostly marketcap-weighted. As a result, the correlation to the market is often high as shown in the correlation matrix below.

Portfolio Update Dec 01, 2021: Hello again! Since my new rebalancing process is a bit… “bumpy”… compared to my original approach, I will do some loose updates from now on instead of describing my Buys/Sells in detail. To see my portfolio composition and past trades, check out the links on the right of my Substack feed under “Further Resources” (Google Drive PDF Download).

A New Rebalancing Approach: My last 6-month investment cycle ended on November 3. I did not write about the last trade of the cycle because I was very busy (finally submitted my PhD thesis!). Sorry about that. The last move was to sell my beloved Polish lingerie position (Esotiq & Henderson) for 169%. Nice way to end a cycle. I replaced it with the French media/industrial conglomerate “Compagnie de l`Odet”. I won’t go into detail this time but you can check out the stock here:

Rebalancing October 14/15: Selling Qurate Retail Inc; Buying Kintetsu World Express Inc: Last week I sold my Qurate position (US, tele/online shopping, $4.1B MCap, buy date: March 23, 2021) with a -16% pre-tax total return. The stock entered 2021 with strong momentum and was (and still is) one of the cheapest high quality names in the US market. However, the momentum collapsed and the stock is in a downtrend since June. Many investors, especially on Fintwit, are loyal to the company and its stoc

Portfolio Update October 2021: TOTAL PORTFOLIO: Currently my total net worth is divided into 69% global systematic multi-factor equity investing, 13% discretionary equity positions, 10% crypto exposure and 8% cash. In the following I will give a short overview to all parts. Some crypto and cash exposure is not part of the shown stats and graphs since it is stored on other accounts.

Rebalancing October 5, 2021: Selling Triple-S Management Corp; Buying Econocom Group: SELL TRIPLE-S MANAGEMENT Today I replaced my Triple-S Management (Puerto Rico, MCap $836M, Healthcare Plans) position. To be honest, I sold the position already in September because the stock traded flat since an acquisition announcement by GuideWell in August. The announcement resulted in a strong bounce of the stock price, resulting in 38% pretax TR for the trade since the buy on March 4, 2021.