Robo-Investing is Gearing Up

As money managers allocate more resources to quantitative model-building, they are also amping up robo-advising services for clients seeking low cost investment alternatives, writes Validea CEO John Reese in this week’s Forbes.

Since many of these strategies are outperforming actively managed funds, writes Reese, they are increasingly attractive to investors. He cites the example of BlackRock, the largest asset manager in the world (overseeing more than $5 trillion in assets), which announced last month that it will consolidate some actively managed mutual funds with “computer-centric peers.”

Using guru-based stock screening models he created that rank stocks “based solely on their investment fundamentals,” Reese identifies the following four high-scoring picks:

  • Biogen (BIIB) is a biopharmaceutical company that focuses on discovering, developing, manufacturing and delivery therapies for serious neurological and autoimmune diseases. The company scores well based on the relationship between price-earnings and growth in earnings-per-share (PEG ratio) as well as its ability to pay off debt with earnings in under two years.
  • NetEase (NTES), a tech company that operates an online community in China, earns high marks for its debt-free balance sheet and ten-year average return-on-equity.
  • Ltd. (USA) (BAP) is a financial services holding company in Peru that is favored for its PEG ratio, persistent and expanding earnings-per-share and average return-on-equity.
  • Banco Macro SA (BMA) is an Argentina-based financial institution favored for is free cash flow-per-share as well as management’s use of retained earnings.