Finding the Top Growth and Value Names Abroad
Over the past two weeks, we've explored global trends in Growth and Value to determine the countries that have had the most (and least) exposure to those factors. Today, using our new Security Search feature, we're going to find the best positioned Growth and Value stocks across the ACWI index.
Many clients have asked us for a tool that allows them to search for stocks that fit certain criteria within a given universe. With the release of Security Search, you now have the ability to quickly filter down names within a factor model by:
- Security descriptors (country, market cap, liquidity)
- Security universe (membership in portfolios, interest lists, and ETFs)
- Factor risk values
- Factor exposure characteristics
We're very excited about this new feature as it empowers managers and analysts to find specific stocks that fit their investment strategy, or to hedge or amplify their factor bets in an easy-to-use fashion.
Before we share the results of the Growth and Value screen, here's a quick rundown of market and factor trends that we've seen over the past week in the US model.
3/15/19 - 3/21/19
The market drifted upwards earlier in the week, then saw a significant contraction on Friday (not captured in above chart) after several negative macroeconomic datapoints out of Europe and the US. Among these were disappointing manufacturing data from the Eurozone and indications that US manufacturing and services saw slower than expected growth in February. A resultant flight to debt precipitated an inversion of the Treasury yield curve for the first time since 2007, stoking fears of a recession in the next 18 months.
Here's an update on how some key factors have changed in the US model over the past week, using our normalized return indicator:
- The normalized sell-off that Profitability has seen over the past month has appeared to slow as it approaches Extremely Oversold territory.
- Market Sensitivity continued to drift towards Neutral, coming off of recent highs of +3.26 SD above the mean on 2/4/19.
- Growth, Volatility, and Earnings Yield continued to see weakness, while Size and Momentum saw continued strength after they both bottomed out in late February.
Hunting for Growth and Value
Equipped with our robust new Security Search tool, we set out to find the stocks around the world that represent the best Growth and Value investments. Below we'll describe the criteria that we selected and walk you through how we used Security Search to quickly and easily find a list of companies that satisfied it.
- Universe: ACWI (the index we've been using over the past few weeks)
- Growth exposure: Greater than 0.5
- Momentum exposure: Less than 0.2 (we set this limit because we don't want to buy into momentum rather than finding stocks that truly exhibit Growth characteristics).
- Specific Risk: Greater than 50% (we want to ensure we're finding stocks with high idiosyncratic risk).
- Countries: ex-US (Since this is a global exercise, we decided to remove the US so we could focus on Growth abroad).
- Sectors: ex-Internet Software & Services, ex-Tech Hardware, ex-Biotech, ex-Healthcare (by removing these sectors, we're able to dig a little deeper than the typical arbiters of Growth).
- Liquidity: Lastly, we filtered for stocks over 25mm ADV
In just a few simple steps, we end up with the following list of the top 10 companies that meet all of the above requirements:
We then ran a similar search for Value stocks that fit the below criteria:
- Universe: ACWI
- Value exposure: Greater than 0.5
- Momentum exposure: Less than 0.2
- Specific Risk: Greater than 50%
- Countries: ex-US
- Sectors: ex-Oil & Gas, ex-Banks, ex-Utilities
- Liquidity: Over 25mm ADV
And turned up the following list of the top 10 companies:
The results here confirm some of the learnings that we've gleaned over the past couple of weeks. In last week's analysis of global Value, we saw that Korea has been one of the most consistent sources of positive Value exposure over the past decade. Through Security Search we can actually pinpoint the Korean stocks that are currently driving that trend. When we ran the same historical analysis for Growth, we saw China and Japan at the vanguard of worldwide Growth exposure, which is mirrored in the table above. Perhaps the most interesting insight here is that Fiat Chrysler happens to be top 10 in Growth and Value based on our criteria.
Hopefully this brief exercise has demonstrated how powerful our new Security Search feature is, and how it can help you to quickly filter for new ideas that can help you be successful in your investment process. If you're a current user and would like a teach-in on how to utilize this tool, or if you're interested in seeing how Omega Point can help you manage factors in your portfolio, please don't hesitate to reach out.