This post was originally included as part of an ebook that I published alongside the launch of my book, Tradestream, entitled “Tradestreaming and the Future of Investing”. The content was so good I wanted everyone to have access to it. 
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At Validea, our belief is that investors can produce market outperformance by following the quantitative strategies of Wall Street greats, like Warren Buffett, Peter Lynch, John Neff, Joel Greenblatt, Ben Graham and others. Rather than creating new strategies, Validea takes the publicly disclosed stock selection methods outlined by these successful long term investors in their writings and lectures and captures their methodologies in a systematic investment approach that allows for bottom-up stock analysis, stock screening and model portfolio creation. While advancements in technology and fundamental stock data availability have been crucial in the development of the next generation of stock screening tools, Validea’s algorithms are proprietary and incorporate aspects of artificial intelligence so that certain criteria are measured in the same way a human would measure them.
Simple screens, like screening on the Price-to-Earnings ratio or Relative Strength, are useful as a starting point for building a portfolio, but the sophistication and uniqueness of guru-models like Validea’s allow for the selection of top rated stocks according to each proven fundamentally-based investment strategy. By vetting over 6,000 securities for over 7 years through these models, which have anywhere from five to fifteen distinct criteria, we have demonstrated the value of these approaches through our model portfolio tool. By holding baskets of stocks that pass through a guru filter, investors are able to statistically put the odds in their favor and over time, this results in 55-60% of portfolio positions winning. Applying these strategies through a disciplined framework allows for excellent potential for long term market beating returns.
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Justin Carbonneau is a partner at Validea Capital and manages the firm’s Private Client Group. He also acts as the principal business development officer for the company and is responsible for managing growth efforts and strategic initiatives. Prior to joining Validea Capital, Justin was a controller for a Fortune 500 healthcare company where he was a member of the firm’s leadership development program.
(book): Perhaps the best of the Buffett books, Buffettology is a great resource for investors to learn how Buffett values companies, complete with formulas
(book): With Buffett Beyond Value, you’ll learn that, contrary to popular belief, Warren Buffett is not a pure value investor, but a unique thinker who combines the principles of both value and growth investing strategies.