Jacob Pozharny, a partner at Bridgeway Capital Management, dives into the world of intangible assets and their critical role in modern investment strategies. He explains how elements like intellectual property and brand value complicate traditional valuation metrics. Jacob highlights the growing importance of sentiment analysis for high-intangible companies and discusses the implications of AI on valuation methods. He also shares insights on long-short investing, the importance of humility in investing, and opportunities in international markets.
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insights INSIGHT
Intangible Assets and Their Importance
Intangible assets are hard-to-measure assets like intellectual property, brand value, and customer relationships that significantly influence a company's market value.
These assets are increasingly important in modern investing, challenging traditional valuation approaches.
insights INSIGHT
Measuring Intangible Intensity
Intangible capital intensity is measured by analyzing capitalized intangible assets (excluding goodwill), innovation capital (R&D), and organizational capital (SG&A).
These metrics are ranked and averaged to categorize industries from high to low intangible intensity.
insights INSIGHT
Intangible Intensity Across Industries
Intangible intensity growth is not limited to the technology sector; it's prevalent in various knowledge-based industries like biotech, financials, and telecom.
This growth impacts traditional valuation metrics like ROE and book value, especially for high-intangible companies.
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The End of Accounting and the Path Forward for Investors and Managers
and the Path Forward for Investors and Managers
Baruch Lev
Feng Gu
The book, based on comprehensive empirical analysis, highlights the continuous deterioration of financial documents' relevance to investors' decisions. It discusses the reasons behind the loss of relevance of accounting in today's market and introduces the 'Value Creation Report' as a solution. The authors provide case studies across various industries to demonstrate the utility of this new approach in identifying and evaluating a company's true value-creating resources.
In this episode of Excess Returns, hosts Jack Forehand and Justin Carbonneau sit down with Jacob Pozharny, partner at Bridgeway Capital Management, to explore the increasingly important role of intangible assets in modern investing.
Jacob breaks down what intangible assets are - from intellectual property and proprietary algorithms to brand value and customer relationships - and explains how these harder-to-measure assets are changing traditional investment approaches. He discusses Bridgeway's pioneering research on "intangible intensity" and how it affects their investment strategy, particularly for high vs. low intangible companies.
Key topics covered:
How intangible assets complicate traditional valuation metrics
Why sentiment analysis matters more for high-intangible companies
The implications of AI for intangible asset valuation
Bridgeway's approach to long-short investing
International investing opportunities and market efficiency
The importance of understanding model assumptions and staying humble as an investor
Whether you're interested in quantitative investing, understanding modern valuation frameworks, or keeping up with evolving market dynamics, this conversation offers valuable insights into how one of the industry's leading firms approaches these challenges.
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