The Advantages of Quantitative Stock Selection
This week’s AAII Weekly Digest highlights these
“must-read” AAII articles:
Given Warren Buffett’s success as an investor, it is no wonder that many try to mimic his investment philosophy. This has given rise to an entire cottage industry of books that try to distill Buffett’s approach. One such book is Robert Hagstrom’s “The Essential Buffett” (John Wiley & Sons, 2001). Using this book, AAII developed a quantitative screening strategy to identify “Buffett stocks.”
Acquisitions give managers opportunities to artificially boost performance or hide past mistakes. Learn how to spot these shenanigans, including seven categories of earnings manipulation.
Quantitative strategies allow thousands of stocks to be ranked by specific characteristics, such as value or momentum. This is an interview with Sudhir Nanda, the head of T. Rowe Price’s Quantitative Equity Group as well as a portfolio manager for the company’s QM U.S. Small-Cap Growth Equity Fund (PRDSX) and QM Global Equity Fund (TQGEX) mutual funds, discussing his approach and what individual investors can learn from it.
The quality of management, particularly the CEO, is an important indicator when evaluating a company. Astute investors will look for evidence of the CEO’s qualities in the shareholder letter.
Our Member Question for this week is:
Do you think that future generations of retirees will be worse off than those currently in retirement?
Vote to answer this week’s Special Question: If you could offer your 21-year-old self one piece of advice when it comes to retirement planning, what would it be?
Last Week’s Results:
Poll results are as of 9 a.m. (Central) on Monday. 2,838 respondents.
While academic and empirical evidence show that stocks, in the long run, post the best risk-adjusted returns, there are times when stocks will underperform other asset classes. Our weekly survey question asked our readers what asset class they believe is the best long-term investment. As a follow up, we then asked what is the biggest threat to their “best” asset’s future returns.
One of the biggest difficulties for individuals interested in investing in stocks is getting started. This AAII e-book provides a general outline for analyzing stocks and walks through the process as it is practically applied to specific types of investment approaches. It first describes, in very broad terms, the basic process that is followed in fundamental analysis. It then goes through the various steps in more detail and shows how they can be adapted and practically applied to an individual’s specific approach using commonly found information sources.