Gaurang Merani of Global Investing Insight presented his research findings into the practical replicability of Ben Graham’s famous “net-net” value investing strategy at Asian Investing Summit 2022.
Presentation summary:
Benjamin Graham developed an investment strategy that involved purchasing securities for less than their “current-asset value”, “a rough index of the liquidating value”.
Gaurang uncovered ten research papers that examined the returns achieved by investing in such securities which were conducted over a number of decades and across various geographies. In general, the research found that the strategy generated a remarkable level of outperformance.
Gaurang’s objective was to answer the question, “Could the returns reported in the research have been achieved by an investor in practice?” To meet this objective, Gaurang developed a methodology to analyze the evidence and determine its reliability.
Gaurang found that each of the studies suffered, or may have potentially suffered, from a number of biases which adversely impacted the reliability of the results contained therein. He therefore concluded that, in essence, a practitioner could not have achieved the returns reported in the research.
Lastly, Gaurang touched on the implications of his findings for practitioners of the investment strategy, as well as for evidence-based investors at large.
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About the instructor:
After nearly 15 years in corporate finance, forensic accounting and financial risk management Gaurang focused his attention on global equity research and portfolio management. He expended many thousands of hours over a number of years researching finance, investing and human behaviour. The result of his research effort, which is continually ongoing, was the development and implementation of two systematic investment strategies: “Quantitative Deep Value” and “Quantitative Value with Momentum”. He uses the aforementioned strategies to manage the capital of High Net Worth Individuals (HNWIs), friends, family and himself. Interestingly, one of his European based HNWIs has a history of identifying asset managers at the commencement of their careers who have subsequently gone on to produce enviable track records.
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