Value Investing

Value stocks identified by the Lakonishok screen often outperform expectations when they begin to recover, and the secret to this approach lies in pairing value with momentum. This combination allows investors to uncover hidden growth opportunities in undervalued companies that are just starting to show signs of recovery. The strategy not only identifies companies trading below their intrinsic worth but also those gaining upward price momentum and rising earnings estimates, positioning them for potential outperformance.

How do you think pairing value with momentum helps capture growth opportunities in these undervalued stocks? Have you used a similar strategy in your investing? If you haven't read the article "Looking to Lakonishok for Latent Gems", I highly recommend checking it out for a deeper dive into how this screen can help identify companies with strong upside potential.

If you've already used the AAII Lakonishok screen or are curious about it, I'd love to hear your thoughts! Let's discuss how value and momentum together create powerful growth opportunities.

Jenna,

I found this to be one of the more informative articles.

Not only because the Lakonishok screening process includes complementary multiple factors that broaden the approach, but also because the value-add analysis John provided in his comparative extended analyses.  

I want to thank John personally for taking the time to present indicator data in an organized sequence of tables and for including detailed analyses that compared key indicators on the AAII Lakonishok screen (Table 1) that surfaced the 25 passing companies that John then compared to other companies in two larger universes that zoomed out 20x and 200x magnitudes – the SPX 500 members  (it's really 504) and the 5,000 (probably nearer 7,500) broader US exchange-listed members.

These derived ratios enhanced my ability to discriminate the relative advantages of each indicator. The short unlabeled table lists these same indicators, but the expanded comparisons enabled me to see each comparison's computed relative values (NOT the same as the RSI indicator).

These derived ratios then helped me create a matrix to rank each indicator's relative strengths, providing the ability to see +/- relationships across indicators vertically and horizontally.

AAII should include similar comparisons in all future articles.

While AAAI does make specific recommendations, providing the ability to analyze data can the differences that make a difference.

As the last sentence in the article advises, "You will want to do your homework to see why these companies are at their current levels. Only then will you gain insight into those that will continue to languish and those that may eventually flourish."

Regards, 

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BARRY JOHNSON
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