Performance of the Valuentum Buying Index
publication date: Oct 13, 2014
author/source: Valuentum Analysts
Note: A more recent analysis of the Valuentum Buying Index rating system can be accessed at the following link: https://www.valuentum.com/articles/Value_and_Momentum_Within_Stocks_Too
Two separate studies have reinforced the efficacy of the Valuentum Buying Index, both as a portfolio optimization tool and as an idea generator. If you cannot view the video, please consult the transcript that follows.
To view Valuentum's updated YouTube page, please see here.
The studies referred to in this video can be accessed as follows:
Why Valuentum Buying Index Ratings Matter: https://www.valuentum.com/articles/20141003_1
Valuentum’s Performance on Seeking Alpha: https://www.valuentum.com/articles/20141009
Please be sure to read the studies closely in addition to watching the video or consulting the transcript below.
Brian Nelson, CFA:
This is Brian Nelson from Valuentum Securities.
I’d like to talk about a couple studies that we’ve performed on the Valuentum Buying Index rating system. This is the numerical score that’s on the top of every one of our 16-page stock research reports. The Valuentum Buying Index breaks down into three unique pillars: 1) an extensive discounted free cash flow methodology deriving an intrinsic value estimate for each stock, 2) coupled with a relative valuation methodology using the price-to-earnings ratio and the price-earnings-to-growth ratio relative to a company’s peers and competitors, and then 3) a technical and momentum assessment that we used to gain conviction within the overall valuation context of a company.
So, the first test that I wanted to talk about was a study that was performed on 570 externally-selected stocks that Valuentum provided the Valuentum Buying Index ratings on. The performance showed a very strong correlation between high Valuentum Buying Index ratings and better returns and low Valuentum Buying Index ratings and lower returns. The Valuentum Buying Index was shown to have a very high predictability, a driver behind understanding why stocks had those particular returns in the study. The efficacy of the Valuentum Buying Index, from our perspective, continues to be second to none.
We also wanted to talk about a study that we performed thanks to our partner Seeking Alpha. Seeking Alpha recently published performance on articles that were tagged either long ideas or short ideas. Valuentum had no prior knowledge of the significance of the tagging system. Performance measured the returns of the stock over a three, six, and twelve-month period, and what the results showed was that the Valuentum Buying Index, the Valuentum process, revealed significant outperformance over a three-month, six month time horizon, and with respect to some of the quote/unquote short ideas they were actually negative over a three month horizon.
The Seeking Alpha study has some limitations and though the results were very affirming in terms of the efficacy of the Valuentum process, we think one of the most important parts of the study is to show just how well some of our ideas are performing even in a public context and provide that perspective and transparency to continue to continue to gain your trust. I hope this video was informative. The Valuentum Buying Index continues to showcase its strong predictive nature, and we look to continue to roll it out across new strategies.
Thank you very much for joining us. If you have any questions please reach out to us. We’re available at email@example.com. Thanks.
Tickerized for Best Ideas portfolio holdings at the time of original publication. The Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio are not real money portfolios. Results are hypothetical and do not represent actual trading. Past results are not a guarantee of future performance.