Formula Investing: Schwartz and Hanauer compare the Magic Formula and Acquirer’s Multiple | S07 E17

Bullish:

• $MOMENTUM - Momentum has been a strong performing factor over the past year, suggesting potential continued outperformance.

  • “I think, momentum has been over the last year something a good factor.”

    Matthias·11:49
• $QUALITY - Quality has been a strong factor in recent years, though there are questions about measurement methods.

  • “I think momentum has been over the last year something a good factor. Also quality, yeah, of although there's the question how to measure it, what was strong in recent years.”

    Matthias·11:49
• $LOWVOL - Low volatility strategies, such as the conservative formula, offer downside protection, potentially outperforming in bearish markets.

  • “And maybe the conservative formula is the most distinct one because it has this low volatility element, which leads that you maybe lack in really strong bull market but it gives you the best downside protection”

    Matthias·21:51
• $SMALLCAP - Investors should consider allocating to small caps for portfolio diversification, though performance may be driven more by valuation changes than operating performance.

  • “I think as an investor, you should have, a location to small caps just because they are in the market portfolio. And maybe due to the, also the performance of small caps versus large caps, for instance, can be a lot explained by, by changing in evaluations, but not just by, by operating, performance.”

    Matthias·55:30

Bearish:

• $VALUE - Value investing has underperformed in recent years, with only brief periods of outperformance.

  • “What has not worked was was value except maybe for '21, '20 '2 parts of '23.”

    Matthias·11:49