Formula Investing: Schwartz and Hanauer compare the Magic Formula and Acquirer’s Multiple | S07 E17

13 snips

May 28, 2025

Guest

Matthias Hanauer

Guest

Marcel Schwartz

Marcel Schwartz, a researcher from the Technical University in Munich, and Matthias Hanauer, a quant researcher at Rubico, discuss their collaborative work on formula investing strategies. They explore the effectiveness of various financial formulas, including the Piotroski F-score, in enhancing investment performance. The conversation highlights trends in market dynamics, the longevity of quality investing over value investing, and the surprising implications of passive investment on stock valuations. Prepare for insights that blend academia with practical investing wisdom!

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INSIGHT

Formulas Outperform Market Historically

Four popular investing formulas consistently outperformed the market over an extended period.
These formulas also showed significant return spreads not explained by traditional models like CAPM.

INSIGHT

Factor Exposure Drives Returns

The positive returns of these investing formulas mainly stem from exposure to established factors like momentum, value, and size.
No investment magic is present; it's about factor exposure.

ADVICE

Continuously Innovate Investment Formulas

Simple formulas require ongoing innovation and adjustment; no single magic formula lasts forever.
Adapt strategies to evolving market conditions and data for sustained outperformance.

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Value: After Hours is a podcast about value investing, Fintwit, and all things finance and investment by investors Tobias Carlisle, and Jake Taylor.

Marcel Schwartz and Matthias X. Hanauer's paper published in the Journal of Portfolio Management: https://www.pm-research.com/content/iijpormgmt/51/6/28 (and the free SSRN version: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5043197)

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ABOUT TOBIAS CARLISLE

Tobias Carlisle is the founder of The Acquirer’s Multiple®, and Acquirers Funds®. He is best known as the author of the #1 new release in Amazon’s Business and Finance The Acquirer’s Multiple: How the Billionaire Contrarians of Deep Value Beat the Market, the Amazon best-sellers Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014) (https://amzn.to/2VwvAGF), Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012) (https://amzn.to/2SDDxrN), and Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors (2016) (https://amzn.to/2SEEjVn). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law.Prior to founding the forerunner to Acquirers Funds in 2010, Tobias was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer. As a lawyer specializing in mergers and acquisitions he has advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam. He is a graduate of the University of Queensland in Australia with degrees in Law (2001) and Business (Management) (1999).