Quantitative Value
Quantitative Value (QV) is an investing strategy which selects for investment the highest-quality cheapest stocks using state-of-the-art computer algorithm. Our implementation of Quantitative Value has generated returns of over %19 per year* on average, with relatively low volatility, and low asset turnover. QV is a great place to find compelling investment ideas.
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. A well-known version of a Quantitative Value strategy is featured in T. Carlisle and W. Grey’s book, Quantitative Value, + Web Site: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors.
The Quantitative Value algorithm selects stocks through a three-step process:
- Establishing a universe of stocks to choose from, per an investor’s market cap preferences. The algo also eliminates the riskiest stocks from the universe (based on insights from vast academic research).Sorting the universe for cheapness using TEV/EBIT valuation multiple and selecting the cheapest stocks
- Sorting the universe for cheapness using TEV/EBIT valuation multiple and selecting the cheapest stocks.
- Sorting the cheapest stocks based on composite Quality and Technical ranking system which include profitability and financial strength metrics, and selecting for investment the highest ranking stocks.
The following table shows the average returns of the top 30 stocks selected with the Quantitative Value Screener and held for a year, vs. the S&P 500 benchmark:
Quant Value Stocks Backtesting
In most years of the last two decades, the average Quantitative Value stock has beaten the S&P 500.
The average yearly return of a QV stock during those 20 years is 17.05% vs. the S&P 500 with 6.88% (incl. dividends). The Excess returns (aka Alpha) is thus 10.17% (!!!) per year.
By using the Quantitative Value screener to find new stock ideas, investors will both save time and increase their chances of finding winning stocks.
The Quantitative Value Screener
Price and valuation multiples are updated in 20min delay.
Last update date – see rightmost column
How to use the Screener:
The stocks are sorted based on QV Quality Rank in descending order, with the best stocks on top. The QV Quality Rank is based on a proprietary algorithm that analyzes tens of fundamental and technical stock factors, including margin figures, profitability ratios and financial stability indicators. The algorithm then ranks and sorts the stocks based on their analyzed quality. For example, a rank of 95% means that the stock has better quality than 95% of the stocks in the universe. Higher is better.
Use the slides above the table to tweak the screener according to your preferences:
The Market Cap Slider can be used to restrict the screener to small caps (for higher returns) or large caps (for lower volatility). We recommend individual investors to keep the market cap un-restricted for the best overall results.
The Quality Rank Slider can be used to restrict the screener to only the highest-quality stocks.
The EV/EBIT Rank Slider can be used to restrict the screener to only the cheapest stocks (a higher rank is cheaper). By default, we limit the screenr to Ranks above 75%, so that the screener presents the 25% of cheapest stocks in the universe, and then sorts them by Quality. You may choose to restrict that Valuation rule further, for example to 20% (Rank>80%) or even 10% (Rank>90%).
The FS_Score slider can be used to restrict the screener to the high-quality or low-quality stocks, based on the modified piotroski's FS_Score.
To assist you with gaining insights on the stocks, we've included various Value & Quality attributes. The Value attributes are highlighted in Blue and the Quality attributes - in purple.
Each column can be sorted by clicking on its title.
Learn More About Quantitative Value:
Read about the design of our proprietary Quantitative Value model in our article: Quantitative Value Strategy – Design & Performance
We recommend watching the lessons about Quantitative Value in our online course “How To beat the market with confidence” – Module 3.
If you’re interested in QV performance during 1999-2019, see our QV performance report.
For an in-depth discussion on the relationship between the Valuation and Quality factors in Quantitative Value vs. The Magic Formula and other strategies, read our white paper Spotlight: The Value of Quality.