The Quant Value newsletter uses a quantitative value investing strategy we have developed and tested in with real money over the past 15 years.
Quantitative value investing is best explained by breaking it into two components:
Quantitative investing is an investing method where large data bases and computers are used to find predictable profitable investment strategies in financial data.
Even though the process of finding profitable strategies is very technical and time consuming the end results can be easily understood by everyone when it is explained in non-technical way.
Value Investing is a strategy of investing in companies that are trading at less than their intrinsic value or simply companies that are undervalued by the stock market.
Quantitative value investing is thus the process of systematically finding and investing in undervalued companies using a time tested and easy to follow investment process.
We do the hard work for you
We have done all the research for you (you get the full research study when you subscribe) and developed an investment model on the best quantitative value investment strategies we have found.
Om a monthly basis we send you the best investment ideas the model has come up with along with a short description of each company so you can easily and quickly make up your mind and invest.
The investment ideas are all generated from a model that uses only strategies that generated the highest returns in the research study we did to find investment strategies that generated the highest returns over long periods of time (more than 15 years).
You get a free copy of the full research study (54 pages) when you subscribe to the Quant Value newsletter.
Our main goal with the Quant Value newsletter is to make market beating returns as easy as possible for you to achieve.
The newsletter contains clear instructions of what you need to do (buy and sell) and is written in plain English that everyone (even if you do not have a financial background) can understand.
We priced the newsletter to make your subscription an excellent investment even if you invest in only a few of the 48 investment ideas (4 per month) we send you on a yearly basis.
Even one good investment will easily give you back the price of your subscription.
You can see the full track record of the newsletter by clicking on the following link:
Yes it will.
Each issue of the newsletter gives you two European and two North American investment ideas.
So even if you only invest in one of the two regions the newsletter will give you 24 ideas per year, more than enough for you to easily and quickly build up a diversified (spread over enough companies) portfolio.
You can see the complete track record of the newsletter by clicking on the link below:
You can see our refund policy by clicking on the following link:
In terms of the Quant Value investment model all recommendations are kept for a year and after that, if they are not in the investment model any more, they are sold.
We do however follow all the companies recommended in the newsletter closely and will let you know by email should you need to sell an investment earlier, for example due to a takeover.
In terms of the Quant Value investment model all recommendations are kept for a year and after that, if they are not in the investment model any more, they are sold.
Because the Quant Value investment model also recommends smaller companies, to give you as a subscriber the chance of investing in all the ideas the newsletter recommends without moving the share price, we have decided to limit the total number of subscribers to 400.
A limit of 400 subscribers will ensure that you can invest in even the smallest companies we recommend without substantially moving the share price.
Once the newsletter gets to 400 subscribers a waiting list will be implemented where loyal subscribers will have preferential rights.
Once you have subscribed to the Quant Value newsletter you will immediately get a complete copy of the research report.
If you are a subscriber and want to download the research report again please do the following:
- Log into the website with the username and password you chose when you subscribed
- Once you have logged in come back to this FAQ question and you will see a link below that you can click on to download the report (the link is only visible when you are logged in)
In each monthly issue of the Quant Value newsletter you will receive four investment ideas, two in North America and two in Europe.
Each monthly issue also tells you what investments to sell.
All investments are held for a year and after that, if they are not in the Quant Value investment model any more, are sold.
In order for you to build up a diversified (spread over enough companies) portfolio we recommend that you have around Euro 40 000 to invest.
This amount will also ensure that your dealing costs per investment (around Euro 2 000 in each company), is not too high.
Lower costs than an investment fund
Also your yearly newsletter subscription will cost Euro 358.80 (Euro 29.90 X 12) which equals a cost of only 0.9% of your Euro 40 000 portfolio. This is a lot less than the 1.5% charges by most investment funds.
Select a low cost safe broker
Always make sure that you select a broker where the dealing costs are low but also where your investments will be safe.
First – will your money be safe
The most important factor for you to consider when selecting a broker is to make very sure your money is safe and that your investments can be easily and quickly be returned to you should your broker run into financial difficulties.
Second – brokerage costs
Only after you have a list of brokers where your money will be safe should you start comparing brokerage costs (costs to execute an order).
Third – what markets are covered?
Also make sure that your broker can execute orders in all (or most of) the countries where the newsletter recommends investment ideas.
The newsletter currently recommends companies in Western Europe, Scandinavia, UK, Switzerland, USA and Canada.
A starting list
Important – The following list is for information purposes only and a place for you to start your research:
- Interactive Brokers
- Saxo Bank
- TD Direct Investing
- Max Blue (German)
Start with the last two newsletters
Once you have read the research study you received with your subscription, and feel comfortable investing I suggest that you buy the companies recommended in the last two issues of the newsletter.
Then slowly increase your investments with future issues of the newsletter, as you feel comfortable.
That way you can be sure that all the companies you invested in is in the investment model.
Remember to only invest step by step as you feel comfortable.
What if the price has gone up or down?
We do not set a buy price when we recommend the companies in the newsletter because when we recommend them they all have good momentum and are undervalued (fits the newsletters investment model).
If the share price declines the undervaluation gets larger but the momentum gets weaker and the other way around.
Even with extreme price movements recommendations have gone up more than 70% after they have already increased 20%. We have also seen turnarounds with share prices increasing 50% from the recommended price after falling 20%.
This is thus the reason why we have not set specific buy prices.
What I will advise is to invest in ideas close to the time the newsletter is released. That way you can be sure the company fits with all the parameters of the investment model, and you have a high probability of a large return.
Keep investment positions small
Remember to not make the size on any one investment too large, stay with the Suggested portfolio weighting (percentage of your whole portfolio) for each investment recommended in the newsletter.
When do I sell?
We have tested a lot of selling strategies and still recommend the one year holding period the newsletter follows.
The newsletter will tell you to sell a company after a year if it is not still in the investment model, in which case it is held for a further year.
As some of the companies recommended in the newsletter are relatively small (market value under 500m) as a general rule we suggest that you always use a limit order when buying or selling.
This will ensure that your buy or sell order does not get executed at a price substantially different to the current market price due to the low volumes traded.
What is a limit order?
As the name suggests, with a limit order, you tell your broker to buy or sell the security at a certain maximum or minimum price that you determine.
This means the order will only be executed if the price is at or better than the limit you have set.
For instance, if you enter a buy limit order with a price of €50 but the current market is €60, the order will not be executed unless the price drops by at least €10 to or under €50.
Note that you may need to pay a slightly higher commission when you place a limit order.
I should also mention here that with a limit order your order will never get executed if the price you set is not reached.
For instance, if you have enter a sell limit order at €40 and the current price is €30, and it does not reach the limit you set, your order will not be executed.
Thus a buy limit order will be executed at the limit price or lower. Similarly, a sell limit order will be executed at the limit price or higher.
Check with your broker but usually your limit order has to be in the currency of the market where you are buying or selling.
This means if you live in Europe and your brokerage account is in Euro but you are buying shares of a company in the UK your limit order has to be in British Pounds (GBP) or Swiss Francs (CHF) if you are buying and selling in Switzerland.
Let’s work through a practical example.
You want to buy 8 000 shares in XYZ Group and your online broker shows you the following information:
Last trade price €1.14 (+0.76% from yesterday)
Volume traded so far today: 46 764 shares
Bid (buy) price: €1.14
Bid (buy) volume wanted: 1 000
Offer (sell) price: €1.16
Offer (sell) volume offered: 9 571
(Keep in mind that his information is in most cases 15 minutes old so it may have changed)
What can you learn from this information?
You can see if you offer €1.16 (1.75% more than the last trade price) you can get your order of 8 000 executed as there is someone in the market that wants to sell 9 571 at that price.
This is good to know because it’s important to get your order executed in one day as in most cases your broker will only charge you brokerage once (remember to ask your broker) even if the total order is executed in a few transactions.
If the 1.75% more is too much for you to pay to get your order executed immediately (I am usually willing to pay about 0.75% more) you can enter your buy limit order at €1.14 or even €1.15 (+0.88%) to see what happens.
I suggest you make your orders valid for a month. That way you can wait for the order to be executed as well as change the limit price if it does not get executed.
If your order is partly executed (4 000 of the 8 000 shares for example) I suggest that you adjust your limit to make sure the complete order gets executed on the same day to avoid double (or even more) brokerage costs.
If nothing happens on the day you entered your order I suggest you wait to see what happens in the following few days. If the price keeps going up I will change the limit order to make sure your order gets executed (€1.16 or higher in this example) as there is nothing worse than running behind a rising share price if you want to buy or a falling share price if you want to sell.
On this page you can see the complete track record of the newsletter:
How is it calculated?
How is this performance calculated you may be thinking?
Exclude dividends and 2% fees
We calculate the performance without dividends and we include a 1% buying and selling fee (2% in total) for all investments bought and sold.
We do not include dividends (even though it will make the performance look even better) to make the performance comparable with the indices (which also do not include dividends) and a 1% buying and selling fee is conservative as you can get away with a lot lower fees is you use a online broker.
Equal to the results you can get
Our aim is to show the newsletter’s performance equal to what you can achieve if you follow its recommendations.
Should I buy all the companies recommended in the newsletter is a question I am sure you have asked yourself.
The simple answer in no, you should never invest in anything if you feel uncomfortable doing so, or if it is a company or investment you do not understand.
Buy all investments
However in terms of the companies recommended in the newsletter if you can understand how the company makes its money you should invest in all the recommended investment ideas.
Let me explain why.
We all have our biases and with investing it is no different. The same as me I am sure you also have industries and companies you like investing in and others you would rather avoid.
Hate gold love asset managers
For example I don’t like investing in gold mining companies as I lost money on them when I started investing (more than 25 years ago)
And I like investing in asset management companies because the business can scale so nicely (as assets increase costs remain relatively unchanged which means profits increase substantially).
Like these I am sure you have your own preferences.
Biases don’t help you
The thing is these biases don’t help us when investing in fact they lower your investment returns because, for irrational reasons, they keep you out of investments that can give you very high returns.
You don’t know the future
No-one knows the future so excluding some investment ideas because of a personal bias just makes no sense.
Getting back to the newsletter.
The newsletter’s investment model carefully selects investment ideas with a high probability of giving you high returns.
Not all ideas will go up a lot.
It is near certain that not all the ideas will increase in price. Some will go up a lot, others not much and some will decline.
The problem is
The problem is neither you nor I (or anyone else) knows what investments will go up the most and what will decline.
Let me give you a few examples.
Would you have thought that a small Danish jeweller would have given you such a large return after falling 66% due to a profit warning and a huge inventory write-off?
This attractive return came from a small UK company that does the guarantee repairs for large consumer electronics companies.
William Hill +118.1%
You would have earned more than 100% if you bought this large old mature UK based gambling company in December 2010.
Alliant Techsystem +112.6%
You would also have more than doubled your money on this undervalued US defence contractor, at a time when analysts were expecting even more defence spending cuts in the USA.
Western Digital +92.5%
Who would have thought that this large computer disk drive manufacturer could have given you such an attractive return?
Roularta Media Group -42.8%
This investment (the worse since the newsletter started in July 2010) lost just over 40% in spite of this Belgium based published already being nicely undervalued when it was recommended in April 2011.
Only 2% in any one idea
Because not all the newsletter’s investment ideas will do well is why we recommend that you don’t invest more than 2% in any one of the ideas.
In summary – your simplest and easiest strategy
Because neither you nor I know the future and our investment preferences (biases) lead us in the wrong direction the simplest and easiest strategy for you to follow is to invest (not more than 2% of your portfolio) in each of the companies recommended in the newsletter.
Model gives you the highest returns
Also as numerous research studies of quantitative decision making models (such as the one used by the newsletter) have shown that the best results are achieve if you strictly follow the model.
This means that any filtering you undertake will only lead to lower returns.
What is a stop-loss?
Let me first explain what a stop-loss strategy is.
If you follow a stop-loss strategy you would sell an investment once it reaches a specified price, usually a percentage fall (25% for example) from the price you paid.
It would thus be a way you can automatically limit your loss from an investment.
Changed my mind on the use of a stop-loss
I have not been a great supporter of following a stop-loss strategy.
This is mainly because previous testing we did brought us to the conclusion that a stop-loss strategy leads to lower returns, even though it did reduce volatility (large price movements up or down).
Why we read all the time?
But you know we look at investment research all the time and I recently found three papers that tested stop-loss strategies with very interesting results.
These research papers changed my mind on the use of a stop-loss strategy.
You can read more about the research papers here: Truths about stop-losses – A stop-loss strategy for the newsletter
This is the stop-loss system we follow in the newsletter:
- A trailing stop-loss system where you calculate the losses from the maximum price the company has reached since you bought it
- Only look to see if the stop-loss percentage has been exceeded on a monthly basis. If you look at it on a daily basis you may sell the investment if the share price becomes volatile. This will also ensure that you keep your trading costs as low as possible
- Sell the investment if at the monthly evaluation date the trailing stop-loss level of 20% has been exceeded
- Measure the trailing stop-loss in the currency of the company’s primary listing. This means measure the stop-loss of a Swiss company in Swiss Francs (CHF).
- Adjust the trailing stop-loss for dividend payments as the share price usually declines the same as the dividend amount.
- Reinvest the cash from the sale in a current newsletter investment idea. This will make sure that you sell losing investments and invest the proceeds in the current best ideas.
The difficult part
The key to making a stop-loss strategy work is to stick to the plan, not once but over and over and over again.
The difficult part is to not let your emotions keep you from selling when a stop-loss level is reached.
Of course it will not always work
These studies all showed the success of a stop-loss strategy over long periods of time, this of course does not mean that a buy and hold strategy will not sometimes outperform your stop-loss strategy, but that over the long term it will definitely reduce your portfolio’s volatility (large losses) and increase your compound investment returns.
If there is a change in recommended investments, for example a spin off, share split, merger or buyout offer I will send you a news update so that you always know what to do with your investment.
However there won’t be any news updates on large share price movements (up or down).
The newsletter’s investment model has been successfully tested over long periods (15 years) and numerous research studies have found that it is best to interfere with a quantitative investment strategy as little as possible.
We always try to have the newsletter in your inbox on the first Tuesday of the month.
If there is a public or bank holiday you may receive it a day or so earlier or later.
How investment ideas for the newsletter are selected is a question we have received from quite a few readers so I thought it a good idea to write about the process.
Ideas from the investment model
The first step is to get a list of companies that fit with the newsletters investment model.
As you know the investment model is compiled from the best investment strategies from the research paper I wrote with my friend Philip Vanstraceele Quantitative Value Investing in Europe: What Works for Achieving Alpha as well as all the latest research we have done on ideas we come across all the time through continuous reading.
You can see some of the latest ideas and testing we have done here: Quant Investing blog
When we have a list of companies
Once we’ve come up with a list of companies that fit with the newsletters investment model we compile an analysis spreadsheet, which includes five years of historical financial data on each of the companies.
Company correctly included
The analysis spreadsheet helps us to make sure the company is not wrongly included in the results of the screener because of data errors or unusual numbers in its financial statements.
24 point checklist
To make sure that these companies fit with the newsletters investment model we work through a 24 point checklist on each company with questions like:
- Are the imported financial numbers correct?
- Are there any outliers in the financial results?
- Does the cash belong to the company? (important for the valuation calculations using enterprise value)
- Is there enough volume traded each day?
- Is there heavy insider buying or selling?
- Is there a lot of short selling?
Check the latest news
If a company has made it through the above process and we haven’t found anything unusual we go to the investment relations website of the company and look at all the latest company news.
We specifically look at the latest financial results (half yearly or quarterly) as well as all the financial press releases of the company to make sure the company has not done anything that has substantially altered its financial situation.
Has the business changed?
We specifically look for actions that can or has substantially changed the business or structure of the company.
Keep in mind the model selects companies based on past results and you thus need to make sure the company has not changed substantially since the publication of its last financial results.
For example we look for:
- Spin-offs, because the company after the spin-off may not look at all like the company that was selected by the investment model on information before the spin-off.
- Special dividends, as these may change the valuation as well as financial position of the company substantially.
All this is done to make sure every company the newsletter recommends is correctly included in the newsletters investment model.
No second guessing
During this whole process we make very sure that we do not second guess the ideas the investment model has come up with.
This is important because a lot of research studies have shown that any second guessing of high performance, time tested investment strategies only results in lower returns.
This is not always easy to do as the investment model may be recommending companies with a lot of negative or positive news, but it’s something we have learned to be able to do over time.
Why do I not invest in all the newsletter’s ideas, is a question I received from quite a few subscribers?
It is a good question and it is only right that I give you a straight answer.
The reason is very simple.
From my investment activities over the past 25 years I feel comfortable with, and can easily keep up with around 35 investments in my portfolio. This means that I only have space for 35 companies and have to be very choosy with the companies I select.
I also get it wrong
But as you have seen I also do not get it right, because a lot of the companies I have not invested in have performed a lot better than the companies I have bought.
I’m close to investing in everything
This is something that has been worrying me for a while and I am seriously thinking of buying all the newsletter’s recommendation because it is clear that I am not able to choose the best companies. But I am not there yet.
This fits with what I keep telling you, you must find your own investment strategy that lets you sleep comfortably at night.