In a recent Op-ed, Quantitative vs. Fundamental Analysis: Finance’s 60 Year Schism, Rafael Resendes (@rresendes) provides historical context on the split between Quantitative and Fundamental Analysis and makes the case to unify these two camps.
“Quantitative investment strategies have intellectually dominated the financial industry for sixty years. In practice, however, fundamental analysis offers crucial advantages. Therefore, it’s time for the two camps to overcome their differences and work together.”
Applied Finance has a strong opinion about the need for investment management and research to better integrate quantitative and fundamental insights completely. In response, we are actively bringing our research insights to the financial community to showcase the benefits of having combined these approaches over the past 25 years. Valuation & Wealth Creation Is Timeless™ and Applied Finance has pioneered implementing rigorous quantitative and deep fundamental analysis concepts to all our investment strategies, which are all in the top 5% of their respective categories since inception.
Our process recently caught Barron’s attention and they featured it in a recent story on how we blend quantitative and fundamental analysis to construct the Select Fund.
If you’re wondering how our analyst team goes about analyzing individual names, Dhaval Sanghavi, CFA shared his thoughts on Why Intel looks like an attractive opportunity.
Lastly, we would love to hear from you. Feel free to send us feedback, suggestions, or comments, we welcome an open dialog.
Saul Marquez (@saulmarquezafg)
Applied Finance, Partner
The Valuation Edge™ Newsletter Articles:
Quantitative investment strategies have intellectually dominated the financial industry for sixty years. In practice, however, fundamental analysis offers crucial advantages. Therefore, it’s time for the two camps to overcome their differences and work together.
Our Co-founder, Rafael Resendes, has been featured by Sarah Max in Barron’s discussing the history behind our flagship Applied Finance Select Fund. Sarah explains why valuation distinguishes the Select Fund from most large value funds and why in the past three years it has performed better than 96% of its peers, and 4.8 percentage points a year better than the Russell1000 Value index.
Dhaval Sanghavi, CFA discusses Intel’s valuation relative to its peers, expectations priced in, new CEO, and its focus on regaining its leadership position in the semiconductor space.
Historically, High momentum stocks have done quite well, with the top quintile outperforming the bottom in many years. In 2020, the High momentum group did significantly well in the early part of the year, while that trend reversed in the second half and into 2021. YTD, we’ve seen the largest reversal in the momentum factor since 2016, with High momentum companies underperforming Low firms by over 15%. The huge push in Momentum in 2020 and then subsequent reversal serves as a cautionary tale to investors chasing returns.