Preface
What the book covers
This book contains a collection of investing strategies based on the application of quantitative analysis to fundamental factors. The strategies are classified by sector and market capitalisation (for the latter, the indexes used are: S&P 500, Russell 2000 and DJ 30).
All the strategies share some common characteristics:
- They are the result of an extensive statistical study on 15 years of historical data, and are also validated by common sense.
- They are 100% fundamental: no use is made of chart analysis or technical indicators.
- They use only US stocks and ETFs. The concepts may well work in other markets but no representation is made about the expected results.
Who this book is for
This book was written for anyone looking for simple, effective and low-risk investing strategies. The strategies described in the following pages can be managed in just a few minutes per month, making them suitable, for example, for investors with a full-time job.
The book is designed to be short, simple and actionable. No specific background in finance or statistics is needed. However, the understanding and implementation of the strategies needs a logical mind and the ability to feel comfortable with browsing online financial data sources.
Structure of the book
The book consists of three parts.
The first part gives the information that readers need to understand how strategies have been designed and evaluated. It also details a portfolio protection method that may be added to any stock strategy to minimise the impact of market downturns.
The second part of the book, and the most important, is organised by 10 sectors. For each sector a strategy is proposed for large capitalisations (companies in the S&P 500 Index) and another one for small capitalisations (companies in the Russell 2000 Index). Mega caps (DJ 30 companies) are treated independently in a separate chapter. Each strategy is then compared to specialised sector indexes.
The final part shows some applications of the strategies introduced in the second part, in particular mixing strategies and top-down analysis.