More and more US companies report negative book value, the result of accounting rules and structural changes in the market. This creates broad confusion and problems for the famous value factor, and indexes or strategies which rely on it as a measure of cheapness.
Travis Fairchild

O’Shaughnessy Asset Management, April 2018.

Daniel Kahneman once said: “What you see is all there is.”

Experience has taught us that many times this is not true.  Seeing past the initial framing of those things which seem apparent is critical.  Failing to investigate beyond just “what you see” will result in decision making that is based on incomplete and sometimes false information.  I give credit to O’Shaughnessy Asset Management (OSAM) for understanding how to look through widely held market beliefs to find the truth.   They continue to demonstrate a unique and high-level understanding of the criteria needed to classify stocks and to identify what metrics are at work driving equity returns.  They’ve authored several white papers, which I recommend highly, on value and factors. These papers illustrate why most analysts and advisors consistently fail to grasp the underlying dynamics of financial statement analysis when it comes to identifying a value stock or which factors work best.  This failure causes the misclassification and erroneous valuation of hundreds of equities and eventually leads to missed opportunity and underperformance.

For years the “class” struggle between the creators of indices has only lent itself to confusion and opaqueness for investing professionals trying to decide what is truly value and what is growth.  Take a look at how Russell and the S&P differ in their descriptions of the value category.  Fortunately, Salt Creek Investors has been able to utilize the pure indices developed by Ron Surz.  This has allowed increased confidence in our quarter-to-quarter solutions and has helped to keep our performance in line with expectations.

Most advisors I speak with think of themselves as value investors.  Seeking to invest in underpriced assets either in relative or absolute terms, they rely on rules-based strategies that are either misunderstood or not properly developed.  Proceed with caution.  Perhaps it is time to reevaluate the processes and metrics you’re using to make your decisions, especially if you’re labeling yourself as a value investor.  The great thing about our business is that a lot of strategies and ideas work because there is no Holy Grail.  BUT, just as many strategies do not work. Failing to completely understand the factors and definitions that drive client investment choices cannot be acceptable.

SCI HIGHLIGHTS

SCI Monthly Webinar

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TOMORROW

TUESDAY, SEPTEMBER 11th

@ 12:00 PM CDT

Thank you for joining us during last week’s SCI Monthly Webinar. We had a great conversation about SCI’s Q2 performance, and we discussed the current state of markets with our CIO Jim Baldwin and Fund Manager at Payden & Rygel, Natalie Trevithick.

After receiving so much positive feedback about last week’s SCI discussion, we will be trying to line up more fund managers to join us in the future.

Join us on September 11th @ 12:00 PM CDT for another great conversation with industry leaders and SCI executives.

Click here to join the SCI Monthly Webinar

 

Meet Dr. Ken Sleeper
from Ocean Park Asset Management

You’re Invited!

FRIDAY, OCTOBER 12th

@ 10:00 AM CDT

LaSalle St. Securities Home Office

940 N. Industrial Dr. Elmhurst, IL 60126

Dr. Ken Sleeper will be visiting the LaSalle St. Home Office to discuss the Ocean Park Strategic Income Strategy, fixed income investing in today’s markets and the advantages of Post-Modern Portfolio Theory.

Come discuss your asset strategy options with an industry leader!


LaSalle St. Investment Advisors, LLC
940 N. Industrial Dr.
Elmhurst, IL 60126

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