The process of using past fundamentals to try to predict future prices has been in place for a very long time, and there is substantial academic evidence to support it. One of the major challenges of it; however, is what happens when we are confronted with breaking points that are so large that a company’s past results prior to it occurring might tell us very little about what it will look like after. The current situation with COVID-19 might be the most significant situation of this type that any of us will experience in our investing lifetimes.
In this episode, we look at the impact of COVID-19 on value investing and offer some practical tips for building a value portfolio during a time like this.
We discuss:
- Why cash is so important at a time like this
- The dangers of over-concentrating in stocks and industries
- How to value stocks when most companies will see significant earnings declines
- Why negative screens take on an added importance during times of crisis
Jack's article: http://blog.validea.com/a-look-at-the-impact-of-covid-19-on-value-investing/
Episode on Negative Screens: https://youtu.be/_wJEIBT98L0
http://blog.validea.com/the-double-edged-sword-of-avoiding-value-traps/
ABOUT THE PODCAST
Excess Returns is an investing podcast hosted by Jack Forehand (@practicalquant) and Justin Carbonneau (@jjcarbonneau), partners at Validea. Justin and Jack discuss a wide range of investing topics including factor investing, value investing, momentum investing, multi-factor investing, trend following, market valuation and more with the goal of helping those who watch and listen become better long-term investors.
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