Philosophy

At O’Shaughnessy Asset Management, our mission is to deliver alpha-generating strategies based on our core investment tenets: Quality Companies with Strong Valuation, Momentum, and Yield. We firmly believe in the value of applying empirical, fundamental research to uncover quantitative stock selection strategies. We have completed an exhaustive study of the historical characteristics that attractive value and growth stocks possess, and this research forms the basis of every portfolio we offer. Our strategies appeal to common sense and select stocks in a logical, unemotional way: We buy quality companies with strong valuation, momentum, and yield.

We do not seek to deviate from our strategies, and we adhere to a disciplined systematic process. We believe that many money managers underperform their benchmarks because of their inherent inability to separate themselves from the emotions that often cloud good decision-making. Our process is consistent and rational; we do not let short-term market fluctuations distract us from our longer-term goals. We allow our stock selection screens to add value over full market cycles and we generally stay fully invested in the market. And, unlike most other quantitative managers, our process is transparent. We show you how and why we choose the stocks that we do, helping you to fully understand our models and how they are designed to work.

Key Research

OSAM stock selection identifiers include:

Value
Buying stocks on sale beats the market

Momentum
Winners continue to win

Yield
Healthy companies that reward shareholders

Quality
Avoiding excessive debt

Multi-Factor Models
Combining value and momentum
works well

Key Research

Value


Value

  • As with any purchase, investors who insist on getting value when buying stocks are generally rewarded, while those who are willing to “pay the moon” are punished.
  • In hypothetical backtests, well-priced value stocks have consistently outperformed the market with less risk.
  • As stocks get more expensive, their return and risk profiles are both likely to diminish.

Annualized Excess Return: O'Shaughnessy Value Composite

Hypothetical Backtested Performance vs. U.S. All Stocks from 1/1/1964 through 12/31/2014

Returns analysis

Sharpe Ratio: O'Shaughnessy Value Composite

Hypothetical Backtested Performance from 1/1/1964 through 12/31/2014

Sharpe Ratio analysis

Momentum


Momentum

  • An object in motion tends to stay in motion, rewarding investors who buy stocks
    when they are “trending up.”
  • In hypothetical backtests, stocks with strong momentum consistently outperform the market with less risk.
  • As momentum slows, return and risk profiles of stocks are both likely to diminish.

Annualized Excess Return: O'Shaughnessy Momentum Composite

Hypothetical Backtested Performance vs. U.S. All Stocks from 1/1/1927 through 12/31/2014

Returns analysis

Sharpe Ratio: O'Shaughnessy Momentum Composite

Hypothetical Backtested Performance from 1/1/1927 through 12/31/2014

Sharpe Ratio analysis

Yield


Yield

  • Shareholder Yield is the combination of dividend yield and corporate stock repurchases.
  • In hypothetical backtests, stocks that are able to pay dividends or buy back shares generally have healthy balance sheets and management interests aligned with shareholders.
  • Stocks with strong yield have consistently outperformed the market with less risk.

Annualized Excess Return: Shareholder Yield

Hypothetical Backtested Performance vs. U.S. Large Stocks from 1/1/1964 through 12/31/2014

Returns analysis

Sharpe Ratio: Shareholder Yield

Hypothetical Backtested Performance from 1/1/1964 through 12/31/2014

Sharpe Ratio analysis

Quality


Quality

  • Quantitative characteristics can be identified and tested to deliver the concept of “quality.”
  • Avoiding companies with excessive debt helps to avoid lower performing stocks with higher risk levels.
  • OSAM’s multi-factor composites for Financial Strength (see below), Earnings Growth, and Earnings Quality screen for quality.

Annualized Excess Return: O'Shaughnessy Financial Strength Composite

Hypothetical Backtested Performance vs. U.S. All Stocks from 1/1/1964 through 12/31/2014

Returns analysis

Sharpe Ratio: O’Shaughnessy Financial Strength Composite

Hypothetical Backtested Performance from 1/1/1964 through 12/31/2014

Sharpe Ratio analysis

Multi-Factor Models


Multi-Factor Models

  • Value and momentum both beat the market on their own.
  • However, even stronger results come from buying stocks not with one characteristic or the other, but with both characteristics.
  • Portfolios of stocks with the combination of strong valuation and momentum show improved performance with lowered risk profiles versus the market or buying value and/or momentum on their own.

Compound Annual Return & Sharpe Ratio

Hypothetical Backtested Performance from 1/1/1964 through 12/31/2013

Returns analysis

Important Information Regarding the Hypothetical and Backtested Performance Results
Source: O'Shaughnessy research utilizing the CRSP Database. Past performance is not an assurance of future results. The performance results shown herein are hypothetical and backtested, and are not that of any fund or account managed by O'Shaughnessy Asset Management.(Does not reflect performance information for any strategy available for investment.)