returns to style using style research’s markets analyzer south korea end february 2011
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Returns to Styleusing Style Research’s
Markets Analyzer
South Korea
End February 2011
International Experience
• Style Investing works• Value and Small Cap works long term• Best Value Markets – Japan & Korea• Most markets have small cap premium• High beta stocks do not generally perform well
Overview
• Value works long term– like in other markets– Sales to Price best last 10 years – 5.0% pa xs return
• Mid cap performs better than large cap– Unlike other markets
• High Beta does not work– like other markets
• Nothing works consistently– Top 10 inconsistent over different time periods
Approach
• Benchmark = market– All stocks with market cap of USD 100 million
• Analysis after sector adjustment– Factor screen within sectors– Eliminates sector bias
• Rebalanced every 6 months– Repriced every month– Includes dividends
Value
Book Value per Share
Dividend Yield
Earnings per Share to Price
Cashflow per Share to Price
Sales per Share to Price
EBITDA to Price
Growth
From September 2002 From September 2002
Return on Equity
Growth in Earnings per Share
Income to Sales
Sales Growth
IBES 12 month Forward Growth in Earnings per Share
From September 2002
IBES FY1 Earnings Revisions
From September 2002
Other
Market Cap
Beta
Momentum 6 months
Momentum 12 month
Quality
From September 2002
Low Accruals
Debt to Equity
Stability of Earnings Growth
Sustainable Growth Rate
Stability of Sales Growth
Stability of IBES 12 mth Growth Forecast
From September 2002
Returns to Style – last 10 yearsQuality and Value works!
SA, annualised
10 year XS returns
Weight: Market Cap, Rebal 6 mths
5.0% pa
Weight: Market Cap, Rebal 3 mths
6.7% pa
Weight: Earnings, Rebal 6 mths
11.7% pa
Comparison
Overview
• Value works long term– like in other markets– Sales to Price best last 10 years – 5.0% pa xs return
• Mid cap performs better than large cap– Unlike other markets
• High Beta does not work– like other markets
• Nothing works consistently– Top 10 inconsistent over different time periods– Rebalance and weighting schemes make a difference