OSAM offers views on issues and events shaping the market, emphasizing the importance of investing with a cool head and disciplined, time-tested strategies.


Microcap as an Alternative to Private Equity

Chris Meredith, OSAM's Director of Research & Portfolio Management, and Portfolio Manager Patrick O'Shaughnessy highlight an alternative to private equity: microcap equities. Private equity has become a central component of many institutional and high-net-worth investment portfolios over the past decade. But, while private equity offers potential advantages, it also requires taking distinct risks. In this paper, learn how microcap equities can help mitigate these risks and also provide strong performance by using proven themes for stock selection.

October 2017

A Returns-Based Approach:
Incorporating U.S. Microcap in Equity Allocations

“Traditional” asset allocation favors capacity-based frameworks that are overly-reliant on flawed market cap-weighted indexes. Also, that approach fails to make adjustments for investor risk tolerance or plan size. Investors who use a returns-based approach instead — adding Micro and Small Cap into the equities mix — can expect to see stronger returns and lower volatility.

August 2017

Microcaps — Factor Spreads, Structural Biases,
and the Institutional Imperative

Many investors readily agree that alpha is scarce. It is hard to find, highly sought after, and requires skill to extract. The eclectic microcap universe provides a disparate group of continually evolving and devolving businesses with structural features that remain persistently attractive for investors.

July 2017

They Can’t All Be That Smart

“There’s a huge range of possibilities in the smart-beta world,
and they can’t all be that smart.”
—Yves Choueifaty

As the number of factor products increase, it’s important to understand how different portfolio construction methods can lead to very different investment results, even when using the same factors. OSAM provides a due diligence framework to understand the potential alignment or misalignment of the portfolio and factor through the lens of Active Share.

June 2017

A Factor AlphaSM Approach to REITs

While factor investing has caught on in public equity markets, it has been largely overlooked in real estate investing. Yet our research shows the public real estate market is a uniquely inefficient, and fertile ground for active, factor-based investing. Factor investing in REITs has a proven track record, in this paper, read how any allocation can benefit from this unique approach to REITs, whether used to increase liquidity, increase access, or broaden the list of real estate opportunities.

March 2017

Factors Are Not Commodities

OSAM Research Director Chris Meredith, CFA challenges and dispels the notion that investment factors are commodities. Factors that some view as generic are nuanced both in their definitions and implementation.

November 2016

Price-to-Book’s Growing Blind Spot

Has an increase in shareholder transactions (primarily share repurchases) contributed to how price-to-book has gradually become ineffectual in recent years? Learn why investors should consider other valuation metrics instead—such as earnings and EBITDA—that have historically outperformed the more traditional price-to-book factor.

October 2016

Buybacks Bears and Bulls

This paper offers an examination of stocks with strong buybacks, trying to determine if they are thriving because of earnings or stock manipulation.

July 2016

Peculiar Stock Leadership in 2016

The first part of 2016 has been one of the most difficult time periods for active management on record. To shed light on this challenging period we explore the profile of the stocks which have led the Russell 1000® benchmarks. Characteristics that historically do poorly are leading the market over this period. Further, the gap of value over growth indices so far this year is more a surge in stocks with terrible sales and earnings growth, and less a triumph of traditional cheap over expensive.

May 2016

The Economic Cycle:
A Factor Investor’s Perspective

“If you spend more than 13 minutes analyzing economic and market forecasts,
you’ve wasted 10 minutes.”
—Peter Lynch

Does the economic cycle have any bearing on investment success? Macro investment houses have constructed intricate frameworks to understand the “economic machine,” but economic data are notoriously prone to revisions, lags, and adjustments in measurement through time—none of which are suitable for timely and reliable investment signals. As factor investors, we believe that certain fundamental characteristics—not economic variables—drive stock returns. We’ve distilled the hundreds of investment factors into cohesive multi-factor themes that can serve as foundational building blocks for equity strategies. Among the litmus tests for those themes is persistence. This paper identifies investment themes that deliver persistent outperformance in multiple different economic environments.

April 6, 2016

Alpha or Assets?
Factor Alpha vs. Smart Beta

“Financial markets lend themselves to initially self-reinforcing
but eventually self-defeating processes.”
—George Soros

Read how to build investment strategies for alpha, not scale—and why we believe the asset management industry has gone in the opposite direction. Though more and more investors are buying “factor”-based strategies, investing using measures like valuation and low volatility, the most popular strategies are applying factors the wrong way: hundreds of holdings and high overlap with their market benchmark (e.g., Smart Beta). Factor Alpha is by far a more powerful way to apply factors, using them first to avoid large chunks of the market and then to build more differentiated portfolios of stocks with only the most attractive overall factor profiles. While not as scaleable as Smart Beta, this alpha-oriented approach has led to much better results for investors.

April 2016

The Inefficient Canadian Market

Read why the Canadian market deserves consideration as a dedicated piece of an investor’s overall asset allocation. Canadian equities have a long history, dating back to 1861, and today it ranks as the world’s fourth largest stock market by market capitalization. Over the period from 1900 to 2014, adjusted for inflation, Canadian equities have returned 5.8 percent annualized, which compares favorably to the U.K’s return of 5.3 percent and slightly lags the U.S. return of 6.5 percent (see also “The Dangers of Indexing in Canada” linked below).

March 2016

A True Microcap Strategy

Is there an undiscovered market where valuations are not systematically picked apart by Wall Street analysts, where huge changes in valuation often go unnoticed, and a stock’s price is very much at odds with its true value? Read this paper to learn more about the opportunity for consistent, long-term excess returns that awaits investors in the overlooked, undervalued and unappreciated, and uniquely-positioned microcap space.

February 2016

The Dangers of Indexing in Canada

The Canadian market gets little attention and is rarely a dedicated piece of an overall asset allocation outside of Canada. However, for the past two decades, it has been one of the most consistent-performing developed markets in the world. Investing in Canada via market cap-weighted indexes can introduce unnecessary risks. This paper shows how active management can give investors an edge in the Canada market.

January 2016

Stocks You Shouldn’t Own

Active management has two potential advantages versus an index. The first advantage is the one that most people think of: active stock selection. But this paper focuses instead on the second potential advantage: active stock elimination, or identifying stocks not to own in the portfolio. While owning strong performers is the most obvious source of excess returns versus a benchmark, the stocks that are in an index but not in an active portfolio often explain as much of the active portfolio’s relative returns.

August 2015

High Conviction Buybacks

Much has been written on the role that buybacks can play in the overall market and whether or not they are implemented with the interests of investors under consideration. This paper focuses on (1) the pre-disposition of companies with high conviction in their own buyback programs to outperform the majority of companies engaged in low conviction buybacks and (2) how investors can use this to their advantage.

July 2015

Inefficiency Breeds Opportunity in Small Cap Equities

With widespread inefficiencies and a greater dispersion of returns, the small cap space calls for an active management approach. This commentary, redefining inefficiency as opportunity, identifies the significant potentials for excess return in small cap equities and serves as a guide to navigate this often-overlooked area of the market. Read this whitepaper to learn how our disciplined, multi-factor strategy offers an alternative to traditional qualitative stock-picking methods.

June 2014

The Power of Share Repurchases

One effective strategy in the U.S. over the past several decades has been to buy stocks that are in the midst of repurchasing significant quantities of their shares—but just blindly following buybacks isn’t always a good strategy. This paper outlines a very brief history of buybacks, explores the reasons (good and bad) that companies buy back stock, and explains the huge advantage available to investors who incorporate buybacks into a total “shareholder yield” calculation to be used in their investment strategy, while at the same time avoiding companies that are buying back shares for the wrong reasons.

May 2014

Alpha Capture and Liquidity — A Look at the Canadian Market

Equity investing in the Canadian market poses unique liquidity and alpha capture challenges. Systematic stock selection based on multi-factor composites for value and momentum strikes a balance between absolute return, risk-adjusted return, and persistence of alpha in the most liquid part of the market. OSAM’s portfolio construction process balances alpha generation with market impact costs. This paper articulates the themes of value and momentum in stock selection and demonstrates their potential to result in significant long-term outperformance of Canadian benchmarks.

March 2014

Value & Momentum — Building a Unique Canadian Equity Portfolio

Canadian equity indexes based on market-cap-weighted constructions are structurally flawed and result in unforeseen concentration risks. Systematically buying stocks based on their valuations and market momentum has proven to be an effective way of beating market-cap-weighted indexes in markets around the world. These two themes work especially well in the Canadian equity market. This paper outlines why these two themes work so well in Canada, and how to use them to build an investment strategy.

March 2013

Combining the Best of Passive and Active Investing

“Whenever you find yourself on the side of the majority, it is time to pause and reflect.”
—Mark Twain

Should investors pay higher fees to active managers in an attempt to beat the market? Or should they instead buy cheap passive index funds or exchange traded funds (ETFs)? The choice between the passive or active approach to investing can have a huge impact on long-term results. In this paper, we evaluate the arguments for each style, and argue for an approach that combines the strengths of both the passive and active approaches.

October 18, 2012

Stock Crashes are Money-Making Opportunities

As appearing on The Wall Street Journal's MarketWatch

Twenty-five years after the crash of 1987, in a MarketWatch guest commentary, Jim O’Shaughnessy shares his research of the market’s long-term behavior in order to determine equity performance following crashes of similar magnitudes.

September 2012

Dividend Yield vs. Dividend Growth

Investor appetite for high-yielding companies continues to grow. However, there are those who believe high dividend payments are a poor indicator of a company’s future growth prospects and prefer to select stocks using “dividend growth” instead. Our research suggests that investors should focus on dividend yield rather than dividend growth rates.

March 2012

Why U.S. Investors Should Look Beyond Dividend Yield

Though U.S. stocks with high dividend yields have become very popular with individual and professional investors, OSAM makes the case for shareholder yield, a factor the Research Team has long advocated, which has provided strong returns for U.S. stocks for more than 80 years. Shareholder yield is the sum of a company’s dividend yield plus its buyback yield (the percentage of shares outstanding that have been repurchased or issued over the last year).

November 2011

Anatomy of a Winning Investment — 2 Keys to Success

As appearing on

As guest contributors to The Street, Jim and Patrick O'Shaughnessy discuss how the fourth edition of What Works on Wall Street can reveal ways to improve return and reduce volatility.

April 2011

Inflation and the U.S. Bond and Stock Markets

“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
—John Maynard Keynes

Jim O’Shaughnessy looks at historical returns for stocks and bonds in various inflationary environments, and what investors might expect going forward.

September 17, 2010

The Economy and the Stock Market

“The most common cause of low prices is pessimism—sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer.”
—Warren Buffett

In the face of so much grim economic news and uncertainty about the future, the OSAM Research Team reviews the historical implications of low economic growth, high unemployment, low consumer confidence and top marginal tax rates on future stock returns.

May 21, 2010

Thoughts on the Correction

“The rational man—like the Loch Ness monster—is sighted often, but photographed rarely.”
— David Dreman

The return of fear has created an opportunity for the long-term equity investor to buy stocks at a major discount. This commentary by the OSAM Research Team may persuade clients to stay calm and, if possible, add to the equity market.

March 2009

A Generational Opportunity

Jim O’Shaughnessy studies how rare the current market downturn has been—and why it may present a once in a lifetime buying opportunity.

January 20, 2009

Change Your Focus, Change Your Future

Jim O’Shaughnessy comments on what we might expect to happen in the coming 11 years. His analysis suggests that it is during this timeframe that we may find the silver lining that should give investors hope and encouragement.

September 2007

O’Shaughnessy 2.0

Read how to avoid the most common roadblocks to successful investing. Jim O’Shaughnessy's commentary explores the importance of knowing the facts and understanding history in order to overcome the seduction of rhetoric and emotion—common pitfalls that trip up many investors.

Investors should keep in mind that there is no certainty that any investment or strategy will be profitable or successful in achieving investment objectives. Past performance is not an indication of future results.