Josef Lakonishok

Josef Lakonishok

This strategy was developed by Dr Josef Lakonishok, who has held numerous professorships at world-renowned universities, including the University of Illinois at Urbana-Champaign, Cornell North Carolina at Chapel Hill and the University of British Columbia. He is the CEO and Chief Investment Officer of LSV Asset Management, where he also heads the research and investment team. In his book The Incredible January Effect, co-authored with Robert A. Haugen, he outlines that there are inefficiencies investors can exploit in order to outperform the overall market. 

Summary

Lakonishok believes in systematically exploiting the judgmental biases of most investors. One of his key insights is that investors tend to extend past performance too far into the future and are willing to buy companies that they see as good value at almost any price. In contrast, Lakonishok seeks out undervalued companies with a good prospect of generating near-term returns. The central point of his method is to avoid development of what he calls a ‘mindset’ about a company. 

Success Formula Value

  1. Exclude companies
    a) in the Miscellaneous Financial Services and Real Estate Operations industries and
    b) traded on the over-the-counter (OTC) market and
    c) traded as American Depositary Receipt (ADR)
  2. MktCapM is >= US$ 500 million (basis year 2000) adjusted yearly
  3. Latest filing current EPS , current P/B, current P/CF or current P/S is < respective industry median -> A company needs to pass only one of these ‘value’ screens
  4. Relative Price Strength over past 26 weeks is >= 0
  5. Relative Price Strength over past 13 weeks is >= Relative Price Strength over past 26 weeks
  6. No downward revisions in Est. EPS for current FY over last month
  7. Est. EPS upward revision for current FY over last month >= 1
  8. Consensus Est. EPS for current FY is > one month ago

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

Books

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