Deep Value is a quantitative investing strategy which selects for investment the cheapest stocks in the universe based on their valuation multiple.
Deep Value stocks are the absolute cheapest stocks, regardless of their quality. Companies get so cheap when they have problems. Such problems could be financial losses, industry and regulatory risks, failing management and lousy products. As most investors will avoid failing companies at any price, stocks of failing companies get cheap relative to their intrinsic value, very cheap. Deep Value investors realize that even companies with problems have some value in them. Sometime it is their assets, other times it is their know how. When a company is failing, there are huge forces pushing it to improve and return to normality. Most companies do return back to the average, and their stock price jump as a result. Investing in a diversified list of Deep Value stocks thus beats the market.
Tobias Carlisle wrote a book about Deep Value, Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, and a website, The Acquirer Multiple, where he advocates investing in a diversified bucket of stocks selected for their low EV/EBIT (which he calls The Acquirer Multiple (r)).
The Deep Value Screeners on this website allow investors to build their own quantitative Deep Value portfolio based on their preferences. Such a portfolio is expected to beat the market over the long term. The screeners prune thousands of SEC filings and perform fundamental analysis on a scale which no human can practically perform. The screeners allow modifying the Market Cap, Beta and Volatility attributes of Deep Value stocks. The result is a portfolio that matches an investor’s worldview and meets a specific taste for returns vs. volatility.
Here’s is how one All-Cap ($200M market cap and up) Deep Value portfolio has performed, based on a simulation spanning 19 years, from 1999 to 2017.
Price and valuation multiples are updated in 20min delay.
Last update date – see rightmost column.
Deep Value Screener based on EV/EBIT Valuation Rank
Deep Value Screener based on VC2 (Composite Value) Valuation Rank
- Market Cap – used to set the lower and upper bounds of the market cap of screener results
- EV/EBIT Rank – Ranks stocks based on EV/EBIT multiple. The higher the rank, the cheaper the stock
- VC2 Rank – Ranks stocks based on VC2 Value Composite 2 multiple (inspired by O’Shaunessy’s book “What Works on Wall Street”). The higher the rank, the cheaper the stock
- Beta3Y Rank – The beta of the stock calculated over the last three years. Lower rank corresponds to lower beta and thus lower volatility
- Price Smoothness Rank – a proprietary measure of a stock price smoothness. Our research shows that excluding the stocks with the highest ranks (jittery stock price behavior) improves returns