Tag Archives: James O’Shaughnessy

O’Shaughnessy Emphasizes the Value of “High-conviction” Buybacks Over the Long Term


Jim O’Shaughnessy, O’Shaughnessy Asset Management, says a long-term investor should be buying now, and compares “low-conviction buybacks” (defined as 5% or less) and “high-conviction buybacks” (over 5%) in identifying attractive stocks. From 1987 to 2014, he says, the return on low-conviction buybacks was 12.1% annually (about 1% over return on all large stocks), but the return on high-conviction buybacks was 15.9% annually. Further, he says that the buyers of these high-conviction buyback stocks “were buying their stocks when they were dirt cheap.” Of all buybacks, 70% are low-conviction, according to O’Shaughnessy.

Going forward, O’Shaughnessy says investors should be taking a value investing approach. “Over long periods of time, value trumps growth, and significantly trumps growth.” He described expensive stocks as “lottery stocks,” noting that some do very well but the average return is negative. To evaluate the value of stocks, he uses a composite of various factors (such as price to earnings) that he found “beats any given factor 82% of all rolling 10-year periods.”

O’Shaughnessy does not think a bear market is on the horizon. Sounding a note of caution, he notes, “human psychology plays such a part in investment psychology,” explaining “fear, greed, and hope have wiped out more investment value than any bear market ever can.”

Great Pages: O’Shaughnessy On Models vs. Humans

Can a single page of a book change your investment life? We believe it can. Periodically, we highlight some of the Great Pages that have had a great impact on our investment philosophy. Today, we cheat just a bit, looking at two pages in James O’Shaughnessy’s classic “What Works on Wall Street”. O’Shaughnessy talks about why models are better at predicting outcomes than humans are.

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The Best Sector For The Long Haul Isn’t What You Might Think

Every other issue of the Validea Hot List newsletter examines one the investing greats behind John P. Reese’s computerized Guru Strategies. This latest issue looks at the James O’Shaughnessy’s research into the best sector for the long term.

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OSAM: Microcaps A Better Opportunity Than PE

Over the past decade or so, investors — particularly institutional investors — have focused more and more on private equity as a way to get exposure to small, potentially high-growth companies. But in a recent research paper, O’Shaughnessy Asset Management’s Chris Meredith and Patrick O’Shaughnessy explain why microcap equities in many cases are a more attractive alternative to private equity.

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Take It From The Gurus: Boring Is Beautiful

In a recent article for Canada’s Globe and Mail, Validea CEO John Reese says that when it comes to investing, boring is beautiful.

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O’Shaughnessy on Investor Psychology, Bond Market Trouble, and Why Value Wins

In a wide-ranging interview with Barry Ritholtz on Bloomberg View, quantitative investing guru James O’Shaughnessy recently talked about why human beings are such inferior prognosticators compared to computer models, what that means for investors, why stocks may well be safer than bonds over the long run, and why holding period duration is so critical.

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O’Shaughnessy: Keep It Simple With Shareholder Yield

You don’t need complicated strategies to beat the market. That’s what James O’Shaughnessy says in a recent column discussing shareholder yield (dividend yield plus buyback yield).
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