Deep Value is a quantitative investing strategy which selects for investment the cheapest stocks in the universe based on their valuation multiple.
Value investing in general, and Quantitative Value in particular, has been proven to beat the market handily in the long term by both practitioners’ experience and academic research. In their book, Quantitative Value, + Web Site: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors, researchers and fund managers Tobias Carlisle and Wesley Grey show that investing in stocks based on their cheapness alone beats Joel Greenblatt’s Magic Formula (a strategy which buys stocks which are both cheap and of high quality). They have found that the best-performing cheapness metrics are valuation multiples based on Enterprise Value (the market value of all stocks and debt, excluding excess cash). Tobias Carlisle wrote a book, 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/EBITDA (which he calls The Acquirer Multiple (r)).
The Deep Value Screeners allows investors to build their own quantitative deep value portfolio. 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 are unique as it allows the flexibility of adjusting the model to investor’s preferences for market cap and number of holdings. It also allows modifying Value, Beta and Price Smoothness factors to result in a portfolio which matches an investor’s worldview and meet a specific taste for returns vs. volatility.
Here’s how an All-Cap ($300M market cap and up) Dep Value portfolio has performed, based on a simulation spanning 18 years, from June 1999 to June 2017:
How to Build a Deep Value Portfolio Using The Screener
Deep Value – What is it?
- What is Deep Value?
- Why does Deep Value outperform?
- How did we design our market-beating model
How To invest in Deep Value?
- Which Stocks to buy?
- How many stocks to buy?
- When to sell and which stocks to sell?
- How well has Deep Value performed?
Price and valuation multiples are updated in 20min delay.