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Strategies & Market Trends : Value Investing
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To: IndependentValue who wrote (55674)7/22/2015 10:22:25 PM
From: Shane M2 Recommendations

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IV,

Wes Gray at alphaarchitect has done research showing that a pretty simple value measure like EBIT/EV is effective in generating excess returns. His process supplements a few other factors, but adding a quality component to his process doesn't add much to a simple stand-alone valuation measure. (He outlines a modified version of Greenblatt's Magic formula approach to incorporate quality, but if I recall the EBIT/EV multiple provided most of the returns). I don't have his book handy, but EBIT/EV as a simple standalone measure applied in a persistent quantitative way worked surprisingly well.

Personally, I prefer "better" companies to simply value companies, but it's for psychological reasons as much as anything. I can stick in there better and better hold through bad times with good companies. I'm a weak hand if I invest in cheap, junk companies. As a result, I'm generally not interested in the deep value stocks: they don't gel well with my personality.
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