Eftersom jag använder mig en del av
Quant Investing Screener så passade jag även på att intervjua Tim du Toit som utvecklat screenern.
Didner & Gerge är ju ett fondbolag som pratar en del om hur de använder någon form av screening för att få ned antalet potentiella kandidater att undersöka närmre. Jag tror de flesta gör så. Världen är så otroligt fylld av olika bolag så man måste på något sätt hantera det. Många kanske i första hand fokuserar på bolag noterade i sitt hemland. Andra att specialisera sig på en viss bransch, kanske en kombination ibland.
Även om man inte har syftet att de facto investera i ett utländskt bolag kan det ändå vara intressant att läsa på om dem. I många fall så får man då en bredare syn på bolag här hemma. Man får även en bättre insyn i branschen i sig. Ta Volvo till exempel. Hur ska man kunna göra en bedömning över branschen om man inte också ser närmre på Volvos konkurrenter? Gör man inte det så är man ju enbart hänvisad till Volvos egen omvärldsbeskrivning. Det kan ju bli lite snävt och enkelspårigt.
En screener kan m.a.o. vara lämplig för att vaska fram intressanta bolag även om man inte avser investera i dem. Detaljkunskap kring en balansräkning kan vara bra, men en utvidgad syn på de stora sammanhangen kan vara minst lika viktig.
Nog babblat. Här kommer intervjun. Håll till godo.
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How did you get started in investing?
In 1986,
shortly after finishing school, I enrolled in a stock market correspondence
course. That really first got me interested in investing.
A year or
so later I pooled my limited funds with an investment from my father and
started to invest in the real world.
I then went
on to make nearly every investment mistake you can think of (technical
analysis, broker recommendations etc.) until I read a unknown 84 page book
called “Winning on the JSE” by Karl Posel an engineer and former professor of
applied mathematics.
This book
was my introduction to value investing. It broke investing down into a logical
process.
The book also
made me realised that investing was not a recent human activity and that there
must be some good research and books about what has worked, not in the short
term but over long periods of time in up and down markets.
So from
about 1998 this is what I have done, read and tried everything I could find
that can help me improve my investment returns.
What is your main investment strategy?
I used to
be a classic value investor investing in low price to earnings, price to book
and high dividend yield companies.
This
however changed when I read the outstanding book by Joel Greenblatt called The Little book that beats the market,
where he introduced me to the Magic Formula
After
finishing the book I started doing a lot more reading and research into
quantitative investing and how it can be combined with value investing.
As part of
my research a friend and I in 2012 set out to find the investment strategy that
would have given you the best returns in the European markets over the 12 year
period from June 1999 to June 2011.
As you know
1999 to 2011 was a horrible time to be an investor (not just in Europe) as this
period included both the bursting of the Internet bubble (2000) the financial
crisis (2007 and 2008) as well as the European sovereign debt crisis (2010 to
2013).
What we
found astounded me, with the best performing strategy returning 1157% over the
12 year period.
In fact the
top 10 strategies we found generated an average return of 881%, a return I’m
sure you will also be proud of.
The thing
about the study that will surprise you (it surprised me) is that valuation was
not the most important factor in any the best performing strategies. Valuation
was important but is not the first thing you should look at.
What was
more important was to first look for companies with strong share price momentum
and select the most undervalued companies from this list.
You may be
asking if the research study changed me from classical value investor to a
completely quantitative value investor.
The answer
is I became a bit of both.
I still
enjoy analysing companies and have of course remained a value investor but I
make sure all of the ideas I analyse come from one of the best investment
strategies in the research study as well as from continued research.
But I’ve
also become a quantitative value investor investing part of my portfolio in
ideas that are quantitatively generated.
How do you mainly find investment ideas?
All the
best ideas from the research paper are saved as templates that all subscribers can
use. We add to these templates as we find additional research we have
independently tested and have found of value.
Can you mention any investment mistakes you
have made and lessons learned from it?
This is an
easy question to answer.
Isn’t it
funny how you remember losers but quickly forget winners? For the life of me I
cannot say what my best investment was, I can however easily say what my
biggest mistakes were.
The largest
one was a company called Lambert Howarth and the huge loss I suffered in 2007
when the company went into administration.
Here is the
summarised version.
In July
2006 I identified Lambert Howarth on
one of my screens. It was trading at book value with a price to earnings ratio
of 6.5, had no debt and cash equal 8% of market value.
Its market
value was £34 million and the previous year had bought back shares with a value
of £10.2 million. And it was trading on a historical 14.7% dividend yield.
You must
admit the company was cheap.
I invested
in August 2006 and after I invested the share price kept on going down. I
re-did my analysis and bought more. The share price declined further and I kept
on buying until the company made up 12% of my portfolio.
Shortly
after I bought the last time the company announced that it had lost the Marks
& Spencer shoe account, this was 50% of their business.
Not much
later the company announced it was going into administration as it lost the
remainder of Marks & Spencer’s business.
Looking
back at my notes and analysis my decision to invest was correct. What was wrong
was that I continuing to buy as the share price went down, allowing the
position to make up such a large part of my portfolio.
Since then
I am a lot more conservative with investments in small companies. I am also a
lot more careful of buying more as a company’s share price falls. This also
fits with the research I mentioned above concerning positive momentum or
relative strength
My other
large mistake was the sofa retailer SCS
Upholstery that also went into administration after credit insurers
cancelled its cover.
What I
learned from that experience was that, irrespective of how large the loss on an
investment is, it is never too late to sell. The money you have invested (even
if there is not much left) is still real money.
Why did you develop the Quant Investing
Screener?
I am always
on the look for ideas and insights that can increase my investment returns. But
in order to make sure that these can really increase my investment returns I
needed a database to test the ideas.
As I did
not find anything that fit my needs (and budget) I decided to build it myself.
This allows me maximum flexibility and the ability to try out all ideas.
As I had to
get a good data source, which as you know is expensive; I also make the
screener available to other like-minded investors.
This does
not mean it only has tools I use, I am always glad to incorporate the ideas of
subscribers to make the use of the screener as wide as possible.
Because I
use the screener to invest my own money is the reason why subscribers can be
sure the data quality as well as the performance of the investment strategies
are good.
I eat my
own cooking.
What makes this screener stand out from other
screeners?
The first
thing you will notice when you use the screener are the four filters (or
funnels) that allow you to select up to four ratios and then use the range
slider (for each ratio separately) to choose the range of companies you want to
include.
The image
below gives you an example of how easy it is to screen using four filters (or
funnels):
The four
ratios mentioned above are just examples. The screener has more than 79 ratios
and indicators you can use to search for companies that exactly meet your
investment strategy.
You can
find a list of all ratios and indicators here: Glossary
Do you have tips to users as how to use the
Quant Investing Screener best?
To get the
most out of the screener the first thing would be to take a quick look at the
two quick start guides we have put together.
This gives
you a quick idea of how the screener works allowing you to quickly find a list
of companies that exactly fit your investment strategy.
We tried to
make it as intuitive to use as possible but some functions, that can make your
life a lot easier, take a bit of getting used to.
You also
don’t have to be a subscriber to take a look at the quick start documents; you
can find them on the bottom of this page Quant Investing Screener This will
also give you a good idea of how the screener works.
Next we
have set up more than 10 pre-defined screens for you, covering everything from
a Quality Dividend Screen to a US Short screen.
Please
don’t worry if the terms are unknown to you, the glossary explains everything in easy to understand English.
And should
anything is unclear just send us a quick email and we will answer as soon as
possible.
Anything else you want to add?
Each person
has his own unique approach to investing and that is a good thing else we will
all be buying the exact same companies.
This is
also the reason why we programmed the screener with over 79 ratios and
indicators to ensure you find something that fits your investment strategy.
And if you
find that something is missing let us know and we will add it.
The idea
with the screener is to allow you to, as easily as possible, find investment ideas
that fit your investment style.
We test strategies all the time to give you an idea of
what works and what not but this is not meant to change your investment style
just to help you with ideas to improve your returns.
And who
does not want that, I included.
Let me end on a more philosophical note.
Investing
is not a difficult skill to master but it is more difficult than it looks.
If you are
interested in investing your own money my best advice is to ignore the popular
media completely. Read books and research studies by other investors that have
been successful over long periods of time in up and down markets. Learn from
each of them but build your own investment strategy by taking the best from
what you've learned that makes sense to you.
Each person
has got a different temperament and invests in a different way. However if you
follow time-tested investment strategies and build your investment strategy on
what has worked you cannot do anything else but have outstanding returns over
long periods of time.
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Med det tackar jag Tim du Toit så mycket för hans tid. Jag har läst en del innan kring och av Tim innan jag började använda screenern. Jag tycker många av Tims tankar, baserade på hans egna erfarenheter är värda att begrunda.
Jag är själv ingen hårdkokt kvant-investerare, men visst har jag smygfuskat lite i gebitet. Magic Sixes är ju ett exempel på det. En del andra bloggare i bloggosfären är också mer kvant-investerare än vad jag är. Intresse för net-nets är ju till exempel på det. Utifrån det perspektivet är det naturligtvis svårt för mig att säga att screenern passar alla, men jag kan tycka att det antagligen är värt att ta en närmre titt på den för de flesta: Quant Investing
