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Returns to Styleusing Style Research’s
Markets Analyzer
South Korea
End February 2011
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International Experience
• Style Investing works• Value and Small Cap works long term• Best Value Markets – Japan & Korea• Most markets have small cap premium• High beta stocks do not generally perform well
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Overview
• Value works long term– like in other markets– Sales to Price best last 10 years – 5.0% pa xs return
• Mid cap performs better than large cap– Unlike other markets
• High Beta does not work– like other markets
• Nothing works consistently– Top 10 inconsistent over different time periods
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Approach
• Benchmark = market– All stocks with market cap of USD 100 million
• Analysis after sector adjustment– Factor screen within sectors– Eliminates sector bias
• Rebalanced every 6 months– Repriced every month– Includes dividends
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Value
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Book Value per Share
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Dividend Yield
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Earnings per Share to Price
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Cashflow per Share to Price
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Sales per Share to Price
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EBITDA to Price
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Growth
From September 2002 From September 2002
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Return on Equity
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Growth in Earnings per Share
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Income to Sales
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Sales Growth
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IBES 12 month Forward Growth in Earnings per Share
From September 2002
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IBES FY1 Earnings Revisions
From September 2002
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Other
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Market Cap
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Beta
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Momentum 6 months
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Momentum 12 month
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Quality
From September 2002
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Low Accruals
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Debt to Equity
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Stability of Earnings Growth
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Sustainable Growth Rate
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Stability of Sales Growth
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Stability of IBES 12 mth Growth Forecast
From September 2002
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Returns to Style – last 10 yearsQuality and Value works!
SA, annualised
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10 year XS returns
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Weight: Market Cap, Rebal 6 mths
5.0% pa
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Weight: Market Cap, Rebal 3 mths
6.7% pa
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Weight: Earnings, Rebal 6 mths
11.7% pa
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Comparison
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Overview
• Value works long term– like in other markets– Sales to Price best last 10 years – 5.0% pa xs return
• Mid cap performs better than large cap– Unlike other markets
• High Beta does not work– like other markets
• Nothing works consistently– Top 10 inconsistent over different time periods– Rebalance and weighting schemes make a difference