Author: Hengfu Hsu, Analytic Investment LLC
Covestor models: Focus Growth, Focus Value, Dividend, Enterprise Value, Deep Value, Opportunistic Value, Earnings Growth
Our Focus Value Model just turned 2 years old. As of August 28, the Focus Value Model has gained 42.5% year to date, compared to a return of 12.2% for the S&P 500 index (SPX), according to data compiled by Covestor. In addition, the portfolio has a beta of 0.87 v.s. S&P 500, and R-square of 0.45 vs. the S&P 500.
The Focus Value portfolio seeks fundamentally undervalued small and micro cap stocks through computer algorithms without using any margin or leverage. We believe this class of stocks are the most inefficiently priced stocks, because there are too many of them for news media, analysts, and fund managers to follow.
However, value investing principles, such as price-to-equity and price-to-sales ratios, still apply. Over the years, we have coded many value investing principles into our computerized strategies to sift through thousands of stocks automatically.
Unlike the popular investing approaches that rely on analyst upgrades, celebrity stock picking shows on CNBC, or patterns on charts, there are no human emotions or buy-sell biases in our investing processes.
There is no guarantee that the Focus Value Model will continue to deliver the same return every year, but we will continue applying exactly the same mechanical investing processes over the many years to come.
