Piotroski and Book/Market-Based Investing

 In a recent article for Nasdaq, Validea CEO John Reese shares insights on quantitative investing and outlines the approach of Stanford University accounting professor Joesph Piotroski (a market guru that inspired one of the stock screening models Reese created for Validea).

Piotroski, writes Reese, was a trailblazer in the investment approach, turning heads on Wall Street in 2000 with his research on unpopular companies with high book-market ratios (defined as total assets minus total liabilities divided by market capitalization). Reese offers an explanation of Piotroski’s approach and the metrics he used, as well as an overview of the Validea portfolio based on this screening model.

Reese identifies the following high-scoring stocks based on book-market ratio and other metrics:

  • Tropicana Entertainment (TPCA) is an owner and operator of regional casino and entertainment properties that earns high marks for its ratio of price-earnings to growth in earnings-per-share as well as its price-sales ratio. View Guru Analysis here.
  • Vale SA (VALE) is a global producer of iron ore and iron ore pellets with a favorable return-on-assets and operating cash flow. View Guru Analysis here.
  • Telefonica Brasil SA (VIV) is a Brazilian mobile telecommunications company that scores well for its operating cash flow and price-dividend ratio. View Guru Analysis here.
  • Mitsui & Co. Ltd. (MITSY) is engaged in the product sales, logistics and financing as well as development of international infrastructure and other projects. The company is favored for its upward trend in liquidity and increase in gross margin. View Guru Analysis here.
  • Genesco Inc. (GCO) is a wholesaler and retailer of footwear, apparel and accessories with favorable liquidity and return-on-assets. View Guru Analysis here.