Using Price-to-Book and Avoiding Composites

In this episode of Excess Returns, we sit down with Matt Zenz of Longview Research Partners to explore factor investing, evidence-based strategies, and the challenges and opportunities in today’s markets. Matt shares insights from his engineering background, his time at DFA, and his current work running the Longview Advantage ETF (EBI). We cover the nuances of value, momentum, size, implementation, and how investors can think more effectively about long-term returns.

Topics covered:

• Matt’s journey from engineering to investing

• Lessons learned at DFA and the foundation of evidence-based investing

• Defining factors and what makes them credible

• The role of value, momentum, quality, and size in portfolios

• The challenges of intangibles and redefining value

• Large cap tech dominance, mean reversion, and whether the world has changed

• Factor timing, valuation spreads, and Cliff Asness’ “sin” framework

• How momentum can be integrated with value tilts

• Portfolio construction: combining factors vs sleeve approaches

• Implementation challenges for large vs small managers

• How Longview manages liquidity, turnover, and trading costs

• The potential impact of AI on factor investing

• Future opportunities in implementation alpha and ETF design

• Matt’s biggest investing belief most peers disagree with

• The key lesson he would teach the average investor

Timestamps:
00:00 Value vs returns and factor investing basics
03:00 From engineering and Boeing to investing
06:15 Time at DFA and lessons in evidence-based investing
07:30 What evidence-based investing really means
09:25 Defining factors and what makes them valid
12:00 Using value, profitability, size, and momentum
16:00 Large cap tech dominance and future returns
18:00 Mean reversion and whether the world has changed
20:00 How long does value need to struggle before it’s “dead”?
22:30 Should value be redefined for intangibles?
25:30 Intangibles, R&D, and why adjustments add noise
27:00 Value’s performance across economic cycles and migration
30:00 Interest rates, growth, and value performance
32:00 Factor timing and valuation spreads
34:15 The role of momentum in timing and implementation
35:00 How Longview applies passive-aggressive tilts
36:30 Combining factors vs sleeve approaches
39:00 How momentum is used in practice
41:30 Factor migration and average holding periods
43:00 The size premium and whether it still exists
44:30 The benefits of being nimble vs large fund families
47:30 Liquidity challenges in small cap value
52:00 The role of AI in investing
54:00 Where implementation adds the most alpha
55:30 One belief Matt holds that peers may disagree with
57:20 The one lesson for the average investor