"Factor" Based Stock Selection
The "Moneyball" of Investment Management
Factor-investing looks for stocks that display specific, shared characteristics that are associated with either return enhancement or risk reduction. This rigorously studied and tested stock selection methodology leverages big data and filters through the noise of statistics and facts that “don’t matter.”
Factor investing is analogous to the popular book, eventually turned movie, Moneyball by Michael Lewis. This story describes the penny-pinched Oakland Athletics’ quest to build a winning baseball team on a low budget. Rather than use traditional recruiting techniques which looked at a player’s age, run speed, batting average, personality, and medical history, they took a different approach, hiring a Yale economist to fill the team’s roster. The economist found that the statistics other recruiters looked at didn’t matter, and to win games, you just needed to find players that didn’t strike out. The “on base percentage” was this team’s “factor” investing strategy.
Factor investing sifts through the noise to build winning portfolios. To learn more, watch the video below:
With a stock selection strategy in place, we are free to employ our award-winning risk management strategies to thrive in good markets and conserve during economic downturns. Learn more about our evidence-based methodologies here.