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Jack Vogel

lines on the record: 33
first: 2019-11-17
most recent: 2019-11-17
sittings or episodes: 1
sources: podcast

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“Mainly on our website, just alfarktech.com. On our site, we have a lot of stuff. I'll highlight maybe two or three of the things on our site. The first would be our blog if you go and find blog. What we do is generally we have about three times a week. We post research articles and our summaries of those articles. More importantly, that are somewhat more readable for investors. You can sign up for a weekly email there. The second is we have white papers on our website. And those white papers highlight a lot of the big picture things that we talked about today like, hey, what's value investing? We discuss it. We have what's momentum investing. So the white paper is there. And then the third is, you know, we have some tools on our website who are interested in learning more as well as want to be factor investors.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“There's a good book called A Complete Guide to Factor-Based Investing. I would say very readable. It gives a high level overview, talks about what is factor investing. And it's really neat book because it walks through what is factor investing, what are factors, which ones do we think can work, and why do we think they could work on a go forward basis? So I think that book is a good place for most people to start.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Doing that. So at the end of the day, it comes back to a content strategy, right? Like Netflix provided a neat modicum or a neat way to provide the content, but it still will go back to content. And we'll see. I do think technology is important, but I'll probably still stick with my cheaper value stocks than the more expensive gross stocks. I think there's some firms that are different. Like we work tried to be a tech company, but really it was just a real estate company. There are other firms that are using unique technology, and I think they're different. But I was just saying, I think some of these firms, when you get down to it, the technology is really just a useful component to an already existing business.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“You always want to make sure if there's like a move or a macro event that's going to adjust the way things happen in the future, you should consider that. And technology obviously is important. I mean, what you've seen recently is a lot of, for a lot of stocks that were the technology firms specific to an industry, like one firm has been the winner. If we look at a couple of examples, like one I think that's just I've always been interested. And again, I've learned to never short stocks, right? Because an expensive stock can continuously get more expensive, more expensive, more expensive. One company that I think is cool. I mean, Netflix, I mean, I use it here and there. But at the end of the day, right, what you're seeing now is, well, wait a minute, Disney had provided all their content to Netflix. And they're like, well, wait a minute, we can do that, right? We can just take all our movies and stream them, right? And you're seeing all the providers.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“That I think value investing is going to work. But it is interesting if you just do like a one factor split value actually beat growth over that time period.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Dead. I think that's kind of where we were getting at. And if so, what would you do? Well, a good thing kind of using the munger, invert the question is to go to people and say, hey, okay, you're telling me value investing is dead. So are you going to recommend me to buy the most expensive companies with the lowest quality? I'm just going to add in quality there, right? And most people be like, well, no, no, that's not what I'm saying, right? And so, you know, I still think value is going to work in the future. At some level, you know, you're buying whenever you make any investment, you're buying stocks on a multiple of earnings. Obviously, you project future earnings as well, right? You're discounting future cash flows. But, you know, I still, I'll probably take it. You'd probably need like another 50 years worth of data to save value's dead, unfortunately, if we wanted to mathematically say, hey, this is statistically insignificant. So I'll probably take it to the grid.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“One thing is you kind of have to dig into the details there and highlight and what happens is if you look at how S&P and Russell create their value and growth indices, they have multiple metrics. So I wouldn't say from my perspective, it's not just a value portfolio. It's a value portfolio with some noise and some negative momentum. And we all know momentum is something you want to tilt towards, but they almost implicitly make the value portfolios have negative momentum. Those portfolios have loss. So high level, when I do a one factor, split the universe on earnings to price and just equal weight, hold it for a year, value actually did better than growth and the market. So I think sometimes like the devil's in the details and we get lost in that. So that's just baseline facts at the outset. But then going to your question, it's like, well, hey, is this?”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Well, the past five years, let's be clear, value has done horrible. Like the past five years, it's just, it's not even a question, no matter how you measure it, it's done poorly. But something that's interesting is over the past 10 years or the past since 2007, if you just said, hey, on like simple measures like earnings to price, free cash flow to enterprise value, EBIT to enterprise value, value actually be growth. Like you just split the market in half, held it for a year and rebalanced every month, right? So you make like overlapping portfolios. Value actually won over the 10 and since 2007. So a natural question is like, well, hey, wait, I'm getting a little confused because everyone's telling me value's gotten killed. And I think what happened is a lot of people are looking at S&P value and growth and Russell 1000 value and growth. And actually over the past 10 years, value got killed by growth on those factors.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Should I get rid of it? The amount of brain power spent on that question alone can be pretty high. And factor investing just eliminates it and says, hey, we're going to rebalance every three months, six months, one year, whatever it is.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“If you're a factor investor, that I'm going to rebalance my portfolio every 12 months or three months or one month, whatever it is, and you just run that model, rebalance the portfolio. So not that there's anything wrong necessarily with a two-year rule. And I assume there that's more of the kind of like a value type strategy where you think a stock's underpriced, right? Because value, as I mentioned earlier, works out to five years. You're not going to have a two-year rule if you're running a momentum or almost like trading type strategy, right? That would be very bad rule to do is say, hey, I'm going to buy a high momentum stock and hold it for two years, right? That's just not a good idea. So the assumption there, you know, when you're talking about guy's rule is it's generally a value strategy. But factor investing is great because it kind of takes one of the big questions or behavioral issues that investors have, which is, oh man, I got a loser. Should I like double down on it?”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So that's a great question. And actually, one of the neat and cool parts of factor investing is at the outset, you kind of preset when you're going to rebalance. And it just takes out all the questioning. For example, like value investing, if you just look at it like the academic perspective, how it's formed is like Fama French and all the academic articles in general. Just say, hey, every single year on June 30th, we're going to rebalance our portfolio, right? So it kind of just takes all the guesswork out of it for kind of how long should I hold this stock in my portfolio, which is nice because as I mentioned, you know, the first question you asked me was, what is factor investing? I said it's a systematic method to taking active bets. You know Ax and”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“For some investors to stick with, they just naturally compare it to the market. It's a behavioral challenge that investors will need to overcome.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, I think you could say, hey, as opposed to buying the market, I'm going to buy just value stocks or I'm going to do value and momentum. I think that can be done. Now, one of the issues or questions is, hey, how is Joe Shimo's value strategy different than Jim's value strategy, right? So that's a hard thing. And then the other hard thing is just naturally if you don't buy the market, well, then what that means is that your strategy is going to not look like the market from a return standpoint. So you need to understand that, you know, if you buy a more active value strategy and one way to measure that's like active share and you're like, hey, I'm buying a fund that's 95% active, which means it's only 5% the market. Why is the market up 2%? And you guys are down 3% this month. Like, well, that's because you bought a strategy that is not the market. So I think that becomes the behavioral thing that can be difficult.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Bad, but one thing that's true is that if you use an ETF that can rebalance the cheap stocks or quality stocks within the ETF itself, it's a more tax efficient vehicle than buying and selling individual stocks. So on average, I would say factor investing, smart beta stuff can be beneficial and helpful to investors.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Time in the market. But I think it's too expensive. So, what should I do? Well, you have a couple options. One is you just go to cash, which I just don't know what's going to happen in the future, but generally equity markets have a positive premium. So an alternative option is you say, hey, well, maybe I like to buy cheaper stocks, right? Because if your whole reason for being out of the market is you just kind of believe that it's too expensive, you could buy cheaper socks. And there's tons of factor ETFs and mutual funds out there that can give you access to strategies and maybe keep that investor in the market when all else SQL, they were just going to bomb out and go to cash. Alternatively, you could do low volatility or quality. We're still fans of value. And I think that's good. And then the last thing is for especially US investors, ETFs are very tax efficient as opposed to doing stock screening, which again, I'm not saying.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, good question. So at a high level in general, factor investing, ETFs or mutual funds, you might hear them called smart beta. But essentially at a high level, in my opinion, for a lot of investors, they're pretty good. Why? Because it's going to give you, at some level, baseline diversification, right? I think one of the worst things you can do as an individual investor, going back to your previous question about stock screener is not having a diversified portfolio. On this question, using a smart beta ETF or mutual fund will kind of generally give you broad baseline diversification. So that's good, right? At the outset, you're given that. And then what I would say is it depends on the investor. And they can actually be very beneficial to a lot of investors. So let's say you're an investor and you're sitting here and you're saying, hey, the market looks expensive. I don't believe in...”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Factor. It works frequently, like doing it every month or even going down every day. But it also worked out to like five years. Like if you just buy cheap stocks, hold for five years. That historically actually did well. Whereas momentum, you need to turn it over a lot. So if you're saying, hey, my rebalance frequency is 12 months, well, then you need to use the factors in a smart method or a smart sequence that actually fits your rebalance frequency. I mean, I wouldn't recommend investors to not use it, but I think I would recommend them to think about how they're using it, why they're using it. If you're going to be rebalancing it every month, maybe momentum is a primary screen makes sense.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So in general, using multiple factors, I would never recommend people don't do that, but I'd recommend you probably smartly think about how you are using your factors. And this comes into effect with the sequencing, the weights, and then how often you rebalance. So for example, let's just say you wanted to use value and momentum. And you're like, hey, those are my two factors. I want to use value and I want to use momentum. Well, a natural question becomes, okay, well, how often do you want to rebalance your strategy, right? And if you're like, hey, I want to use volume momentum and I only want to rebalance this once a year. Those are my two factors. I'm doing it once a year. That's it. Well, in that instance, you probably want your strategy to be a value strategy, which would mean your primary screen would be value. And the secondary screen may be within the value firms, you're going to use momentum. Why? Because value as a”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“A good question, these higher quality firms had higher sharp ratios relative to lower quality firms. And so all else equal, that generally would tend to indicate that higher quality firms probably have lower volatility. Just do the fact that the return, obviously on a sharp ratio, volatility comes into effect there. In general, high quality firms probably are going to be slightly lower or less volatile than just the market or low quality firms. But I guess the one thing I would say is if someone is specifically worried about volatility, they could also just allocate towards low volatility stocks, right? Which would be a more direct measure of attempting to, I would say, mitigate the exact risk that they are concerned about, which is volatility. But it is true that quality generally. Is less volatile.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Share buybacks are good. Accounting quality kind of like accruals are good. So there's a lot of ways you can measure quality, which is kind of hard to say, what's the perfect definition. But in general, profitability is at least a good place to start. Like how just profitable the firm is.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“That's a good question. So when we talk about momentum, most people understand that's, you know, it's a pretty standard definition. It's like, hey, what was your returns over the past 12 months or nine months? Pick your month, that look back period, but that's pretty standard. Whereas quality, there's no perfect definition of quality is what I would say. So I'll pass along a neat little study that was done recently, a paper called What is Quality? Like it actually specifically said, hey, We hear about all these firms and these smart beta products that specifically are mentioning quality. What exactly is it? And they go through and identify multiple definitions of it and they try to investigate and say, hey, which of these definitions can actually help on a quality side? And what they find is generally profitability is good, investment is good, which is firms that are investing less than more.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“You know, investing is hard, right? So you're trying to say, first off, you're going to pick the winning factor strategy. Then you're also going to pick exactly when the market's going to turn. It's just, that's just hard, right? So natural caveat. But specific to factor investing, you know, we generally don't recommend trying to time factors. I think that's a difficult thing. The one exception, you know, if you look back in time was like the internet bubble. There was a natural divergence there where value stocks were so cheap relative to gross stocks. Neat thing showing that, you know, factor timings can be difficult and specific to that in that example when value was historically cheap compared to growth. That was a good time to time it. So we generally don't recommend factor timing. If you're going to do it, I would use like a momentum strategy. There's a lot of”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“On how you measure it is that quality seems to be persistent. Like if a company has persistent profitability or quality minus junk depending on how you define it, that seems to be persistent across time. So quality minus junk or profitable companies tend to do slightly better intercessionary periods.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Obviously, you're buying stocks that are inherently cheaper than the market. So, you know, if you believe that there's going to be, you know, whenever recession or those types of events occur, generally there's multiple compression, meaning that of your earnings, your multiples get compressed and value stocks trade at a cheaper multiple. So they might be one thing and a caveat there is obviously the assumption is the earnings for all stocks decline at the same rate, right? So if value stocks earnings decline at a higher rate, you may just get similar returns to the market. The one factor which I know we're going to talk about that actually seems to do very well on a long short basis is the quality minus junk or quality factor in recessionary periods, but a reasoning quality, which we'll talk about, could be good, is one thing that's interesting about the quality metrics.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I guess two answers there. One thing is that it's probably true given that the market's trading at higher multiples than it historically has, that returns in the future are going to be lower. That's just somewhat of a fact based into the math, right? If you pay a higher multiple for a company, you should ex-ante expect lower returns, all else being equal. I think that's a true point. Trying to time factors and kind of say, you know, which factor should I use given that my thesis is this, is, you know, we're generally wary of that just because it can be difficult. I would say, you know, two factors that may come to mind specific though if you think, hey, the market's going to blow up, right? And then I'll give caveats. So one, you know, would just be value investing. And, you know, one thing about value investing is”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So we prefer enterprise multiples, which is just eBit earnings before interest and taxes divided by the total enterprise value of the firm. And again, total enterprise value is if you wanted to go today and buy the entire firm, how much would it cost you? And so I'll use a quick example. Like for Apple, what would you have to do? You would have to buy all of the debt. You would have to buy all of the stock and minority interest. But then if you bought the entire company, you subtract off cash because if you, if someone said, hey, I have whatever it is, $1.2 trillion, I want to buy Apple. Well, once you buy it, you're going to receive their cash because you would be the owner of Apple. So you subtract cash off. So we're fans of enterprise multiples.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The total enterprise value, like if you wanted to buy the whole firm, that would be like your market cap plus your debt minus cash. And so an example of just a Delta would be if you go back and look at General Motors in 2007, that was a cheap. So I think every value metric is going to have its pro and con we would prefer to use other ones, but I think it's really hard to definitively say book to market's dead. But at the same time, I will say we don't use that.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Growth meaning cheaper stocks on a book to market basis have done worse than expensive stock. Some of the other value metrics, maybe not as much, that delta there. So a natural question is, you know, should we not use book to market? I think it's hard to definitively that one should not use book to market. But I think Toby does highlight some of the downsides potentially to using that measure. And there's going to be a downside to every single measure, right? So if we use a PE multiple, which I think most of your listeners would understand. So a PE multiple is just price divided by earnings per share. So you could alternatively use that, and there's pros to using that, but one potential con of using that is it doesn't account for maybe some inherent risk on the debt side, right? So enterprise multiples, which account for.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“That's a great question. So, yeah, the numbers you say there were from we had a paper, it was in journal portfolio management, and it was the whole idea or premise behind that article was to examine value investing at a high level is to simply try to buy stocks that are cheap. And so to say if a stock is cheap, you have to then come up with some sort of multiple. So price to book or book to market was the historic academic definition of value. And what we found in there is book to market over that time period beat to market, but we actually found, you know, there's other ways to measure value that did better. Now, examples of those would be like earnings to price or our favorite, which is enterprise multiples. Now, specifically answering your question about book to market. Since about 2007, past 10 years, it has underperformed.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“This article for probably almost 30 years now, right? The question is why? Why would value investing work? Why would buying cheap stocks relative to expensive stocks work? And it kind of comes down to there's arguments back and forth of it's either one of two things. The first could be risk. That strategy, you know, the certain stocks are inherently riskier than value would be riskier than growth. Or the other one is behavior. And on the behavioral bias, which is fun to talk about, it's, you know, what's your bias, right? So for value, it's people overextrapolate. So on value stocks, you look at them, you say, oh, these things are all going to zero. Conversely, on gross stocks, you look at them and say, hey, these things are going to infinity, right? And when people overextrapolate, what happens is value stocks get too cheap. Gross stocks get too expensive. And historically, there was a premium to buying value over growth.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So on discussing factors, like one thing you want to look for obviously is that they work not just in like one market, so such as like the US market, but also maybe in other markets, such as international markets, even across other asset classes. And so of those factors, it's still kind of mine and I would say our belief that value and momentum are the two biggest factors. Value, which is just, you know, by just buying cheaper stocks and momentum, which is buying recent winners, seem to continue to win. There are other factors that have been pretty well documented, such as quality or profitability, investment, and then low volatility. But if they ask me, say, you know, which ones do I think I expect to possibly work in the future, I would say value and momentum. And then kind of getting to your question of, you know, why do they work? This is a discussion and academics have been investigating and researching.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Wait and in 12 months I will do the exact same process. So it's a systematic way to make active decisions and bets within investing.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so factor investing, I think one way to think of it is it's a systematic approach to being a somewhat more active investor as opposed to simply buying just market cap-weighted index of stocks, right? So an example, and why I say systematic and active, is, for example, the most known factor that a lot of people talk about is value investing. And so value investing is a strategy whereby you simply try to buy cheaper stocks. Now, you know, a traditional active manager will just say that they, you know, read fundamentals and examine the stock. And when they think it's under price, they will buy it. And then when they, according to their model, think it's expensive, get rid of it. Whereas factor investing is a way to simply say, hey, every 12 months, for example, I'm going to look at all stocks by the cheapest 50 or 100.”
2019-11-17 · We Study Billionaires · TIP269: Factor Based Investing w/ Jack Vogel (Business Podcast) · IDENTIFIED FROM THE TRANSCRIPT