Diary of a Financier

Quant screen: Core Value (September 2013)

In Trading Desk on Mon 7 Oct 2013 at 10:10

My Core Value screen scored the following names as the highest ranking outputs on 9/20:

  1. Gran Tierra Energy Inc ($GTE)- new
  2. Hess ($HES)- vetoed
  3. Argan Inc ($AGX)- watch & Low EV screen
  4. Westjet Airlines ($WJA.TO)- watch
  5. American Railcar Industries ($ARII)- bought 6/10
  6. Foot Locker ($FL)- bought 4/30
  7. Dillards Inc ($DDS)- vetoed, new
  8. Mueller Industries ($MLI)- new
  9. Enersis SA ($ENI)- watch, new

Core Value_2013.09.20

This is a working post, so qualitative assessments for the lists’ new names will follow shortly.

First, I have to note that this new list has already significantly outperformed SPX to date (alpha of 4+).  I wanted to highlight that because it’s important that I emphasize some important characteristics of quant screens in general–mine included.  I’ve been running these screens since 2009, so they’ve been somewhat tested in crisis conditions of both the garden and extraordinary variety.  That said, while they’ve outperformed across most holding periods and without any human intervention, I add a discretionary overlay, including a deep fundamental assessment and technical analysis that help me target entry/exit points.  While this adds considerable friction, I do it because I’ve observed underperformance in my quant strategies during periods of downside dislocations >2 sigmas (i.e. σ or standard deviations) in SPY’s weekly price series.  Right now, the screens’ alphas (α) are increasing with marginal gains, because correlations are falling. But, when correlations rise to 1, everything falls in unison–by definition. So, I’m willing to sacrifice that little bit of alpha to save myself a whole lot of downside capture.

In case anyone needed a reminder, there is no panacea to game natural systems like capital markets.  That’s one reason why DDS got vetoed herein: I don’t want consumer exposure right now, due to my top down analysis.

~~~~

Here’s the performance to date of unrealized positions still open from prior screens; buys executed 4/30 & 6/10, as specified elsewhere herein:

$ARII +19.53%
$FL -5.83%
$FXCM +16.74%
$GCO +10.03%
$IBKR +16.26%
$JOSB -0.88%
$SMP +6.65%

Here’s a followup on the last Core Value screen 8/15:

Passive +4.55% (alpha= +3.99)
Active +6.26% (alpha= +5.70)
SPX +0.56%

Core Value_2013.08.15

Here’s a followup on the Low Enterprise Value screen run 9/3:

Active & Passive +14.05% (alpha= +11.84)
SPX +2.21%

Low EV_2013.08.30

–Romeo

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  1. […] Here’s a followup on the last Core Value screen 9/20: […]

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