Ben Graham Value Screens Do Better Than Quality Strategies: SocGenVW Staff
Societe Generale's update on popular investment screens in emerging markets has some interesting finds. The update from SocGen rounds up data from stock picking screens like Merton Model, Piotroski’s F-scores, Benjamin Graham’s deep-value screen and Joel Greenblatt’s Magic Formula.
Quality strategies find no favor in turbulent emerging markets
SocGen's Andrew Lapthorne and his team find that quality focused strategies did poorly in August whereas value driven screens did better. SocGen points out that in periods like these where market turmoil is peaking, quality focused investments tend to do well. However in case of EMs that does not hold true because investors tend to abandon EM assets as soon as markets get volatile. The report further notes, “The lack of value opportunities in developed markets might explain the continuing demand for EM value companies. This demand might be even stronger given the major currency devaluations that some of the EM markets have seen in recent months, which makes them even cheaper in USD terms.”
Contibuting analysts to Societe Generale's EM investment screen update are Rul Antunes, John Carson, Georgios Oikonomou, Charles Malafosse, Michael Suen and Josh Cherian.
Ben Graham & Rea investment screen up in August
“From quality screens, the Merton model was down -3.4% on a global long-short basis while the Piotroski model ended the month down -8.4%. The Quality & Income Screen also had a weak month and underperformed in all regions (Asia -2.2%, EMEA -1.9% and Latin America -3.3%). From our more value-driven screens, Graham & Rea’s deep value screen was up 3.3% overall, outperforming by 3.5% in Asia, 2% in EMEA and 2.9% in Latin America. Greenblatt’s screen slipped -0.4% mainly due to the weak performance in Latin America (-3.9%). In Asia and EMEA the model actually showed a positive performance (0.7% and 0.3% respectively).”
Picks from both the Ben Graham & Rea model and the Greenblatt Magic Formula are listed below. You can see some names that were screened by both formulas, like VODACOM (OTCMKTS:VDCMY), Tata Motors Limited (NYSE:TTM), KGHM (Poland), CEMIG-PREF (Brazil).