Diary of a Financier

Quant screen: Low Enterprise Value (October 2013)

In Trading Desk on Fri 18 Oct 2013 at 10:24

My Low Enterprise Value screen scored the following names as the highest ranking outputs on 10/08:

  1. HCI Group Inc ($HCI)- bought 10/18
  2. Banco Macro SA ($BMA)- bought 10/18
  3. Barrett Business Services Inc ($BBSI)- watch & new
  4. FXCM Inc ($FXCM)- bought 6/21
  5. Taser International ($TASR)- watch & new
  6. Ehealth Inc ($EHTH)- watch & new

Low EV 2013.10.08

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

Again, I have to note that this new list has already significantly outperformed SPX to date (alpha of 5.3+).

This morning, I finally opened new positions in HCI and BMA–each of which have been on these outputs since I covered them originally in July.  HCI has finally shown the insider participation I had awaited, with insider buying +55% since Q2-end, bringing insider ownership up to 13.5%.  While the chart paints a picture of a real momentum stock, the ridiculously cheap fundamentals and insiders’ vouch were the compelling forces behind my purchase:

$HCI fundamentals & chart (2013.10.18)

Of course, BMA is fundamentally cheap too, mostly due to macro concerns around inflation and the Argentinian sovereign government’s battles with legacy defaults (see: Paul Singer/Elliott Management take on Argentina).  Although nobody can game the outcome of those circumstances–rather binary events without significant probabilities leaning one way or the other–there’s a significant margin of safety in the name, according to its financials.  Further, BMA’s technicals show a daily, long term Cup & Handle filling the gap up to $29 rim resistance with $27 support and strong 2x bull divergence.  In the longer, weekly fractal, I find my price target all the way up at $39 (+40%), which is right shoulder resistance for a long term Head & Shoulders (dating back to 2006) with 2x bull divergence:

$BMA fundamentals & chart (2013.10.18)

~~~~

Here’s the performance to date (intraday) of unrealized positions still open from prior screens; buys executed 4/30, 6/10 & 10/18, as documented:

$ARII +16.00%
$BMA +2.12%
$FL -3.35%
$FXCM +10.04%
$GCO +14.83%
$HCI +0.15%
$IBKR +18.18%
$JOSB +12.42%
$SMP +15.21

Here’s a followup on the last Core Value screen 9/20:

Passive +4.75% (alpha= +2.82)
Active +5.14% (alpha= +3.21)
SPX +1.93%

Core Value 2013.09.20_Update

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

Active & Passive +12.25% (alpha= +5.91)
SPX +6.34%

Low EV 2013.09.03_Update

~~~~

Combine with yesterday’s buy of the Turkey ETF ($TUR), these purchases bring our portfolio’s allocation just over 70/27/3 (stocks/bonds/cash) vs 60/40 benchmark; beta up to 0.95 vs 0.76 benchmark; sigma at 1.11 vs 0.50.

Obviously, much of the recent buying activity has intentionally continued to increase our international exposure.  A quick look at $EFA vs $IWV shows what a good trade that has been over the past quarter-plus, including the stability it provided our portfolio across the weeks of the US’s government shutdown.  While the US has outperformed over the past 2 days, international value remains our trade for the forseeable future.

–Romeo

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  1. […] Here’s an interim followup on the Low Enterprise Value screen run 10/8: […]

  2. […] Here’s a followup on the Low Enterprise Value screen run 10/8: […]

  3. […] that overarching trend.  Like I already said, we’re sitting still, holding our portfolio as is.  A breakdown at SPY’s $174 neckline support is the completion of that 15min H&S […]

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