returns to style using style research’s markets analyzer
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Returns to Style using Style Research’s Markets Analyzer. Taiwan . End April 2011. International Experience. Style Investing works Value and Small Cap works long term Best Value Markets China, Japan and Korea Most markets have small cap premium - PowerPoint PPT PresentationTRANSCRIPT
Returns to Styleusing Style Research’s
Markets Analyzer
Taiwan
End April 2011
International Experience
• Style Investing works• Value and Small Cap works long term• Best Value Markets– China, Japan and Korea
• Most markets have small cap premium• High beta stocks do not generally perform well
Taiwan• Quality and Value works consistently and in long term
– Quality more important unlike in other markets– Quality factors 5/10, Value 3/10 in last 5 years– Quality factors 4/10, Value 3/10 in last 10 years
• Market cap does not work well – no small cap premium– unlike other markets
• High Beta does not work– like other markets
• Returns can be better than sector bets• Nothing works consistently
– Top 10 inconsistent over different time periods
Approach
• Use Style Research’s Market Analyzer• 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
Sector Returns - Positive
Sector Returns - negative
Value – last 5 years
Book to Price
Book to Price
Last 10 Years - SA Last 5 Years - SA
Dividend Yield
Dividend Yield
Last 10 Years - SA Last 5 Years - SA
Earnings Yield
Earnings Yield
Last 10 Years - SA Last 5 Years - SA
Cashflow Yield
Cashflow Yield
Last 10 Years - SA Last 5 Years - SA
Sales to Price
Sales to Price
Last 10 Years - SA Last 5 Years - SA
EBITDA to Price
EBITDA to Price
Last 10 Years - SA Last 5 Years - SA
Growth
Return on Equity
Last 10 Years - SA Last 5 Years - SA
Growth in Earnings per Share
Last 10 Years - SA Last 5 Years - SA
Income to Sales
Last 10 Years - SA Last 5 Years - SA
Sales Growth
Last 10 Years - SA Last 5 Years - SA
Forecast Earnings
Last 10 Years - SA Last 5 Years - SA
Forecast Earnings Revisions
Last 10 Years - SA Last 5 Years - SA
Other
Market Cap
Last 10 Years Last 5 Years - SA
Beta
Last 10 Years - SA Last 5 Years - SA
Price Momentum – 6 months
Last 10 Years - SA Last 5 Years - SA
Price Momentum – 12 months
Last 10 Years - SA Last 5 Years - SA
Quality
Low Accrual
Last 10 Years - SA Last 5 Years - SA
Debt to Equity
Last 10 Years - SA Last 5 Years - SA
Stability of Earnings Growth
Last 10 Years - SA Last 5 Years - SA
Sustainable Growth Rate
Last 10 Years SA Last 5 Years - SA
Stability of Sales Growth
Last 10 Years - SA Last 5 Years - SA
Stability of Forecast Earnings
Last 10 Years - SA Last 5 Years - SA
Returns to Style – last 5 yearsValue and Quality works!
SA, annualised
Returns to Style – last 10 yearsQuality and Value works!
10 Years SA 5 Years - SA
SA, annualised
Returns to StyleQuality & Value works in long term
10 Years SA 5 Years - SA
SA, annualised
Common factors in 5 and 10 years are:1. Quality - Stable IBES Earnings Growth top qtr 2. Value – Earnings Yield 3rd qtr3. Quality - Sustainable Growth bottom qtr4. Value - Dividend Yield 3rd qtr5. Growth - IBES Growth Revisions top qtr
5 year XS returns
10 year XS returns
Value
10 Year - SA 5 Year - SA
Growth
10 Year - SA 5 Year - SA
Other
10 Year - SA 5 Year - SA
Quality
10 Year - SA 5 Year - SA
Market Cap Weight, 6 mth Rebal
XS Return 4.3 % pa
T/over 41 % pa
Market Cap Weight, 3 mth Rebal
XS Return 3.3 % pa
T/over 57 % pa
Total Earnings Weight, 6 mth Rebal
XS Return 5.6 % pa
T/over 71 % pa
Comparison
XS Monthly Return
XS 3 Monthly Return
XS 12 Month Return
Moves Inversely To Market Generally Positive
Stability of Forecast Earnings XS Return12 month Forecast
Shows normal distribution with forecast lower returns
Book to Price Analysis
Shows Alphahas consistentlyexisted
Latest Portfolio against benchmark
Style performs well – last 5 years
High Info ratios in last 5 years Much less risk
Summary• Quality and Value works consistently and in long term
– Quality more important unlike in other markets– Quality factors 5/10, Value 3/10 in last 5 years– Quality factors 4/10, Value 3/10 in last 10 years
• Market cap does not work well – no small cap premium– unlike other markets
• High Beta does not work– like other markets
• Returns can be better than Sector bets• Nothing works consistently
– Top 10 inconsistent over different time periods