Articles by Scott Opsal, CFA Chief Investment Officer

Quality is one of the most popular and successful of the smart beta factors. It is intuitively appealing and serves as a useful defensive strategy in market drawdowns.

Social media, mobile computing, and digital life-in-the-cloud were the dominant storylines for U.S. stocks over the last five years—reaching the apex of popularity following the early-2016 market low.

With the valuation of several high-profile Large Growth names well over 100 times earnings, we consid-er alternatives by examining the relative valuations between LG and other equity categories.

Momentum is one of the most successful investment styles over the long run, and does particularly well in the later stages of a bull market during the run-up to an eventual peak.

Portfolio managers who tilt toward Value or Growth stocks have long known that each style carries with it an inherent bias toward some sectors and away from others. Our recent piece, Value Style’s 100-Year Flood, highlighted the significant role that sector weights (overweight Financials and Energy, underweight Technology) played in Value’s decade-long stretch of underperformance.

This article summarizes our current research into the interaction between factors and sectors. We find that sector weights have a significant influence on some factor results, while the true factor impact is the key driver for others. Watch for our full report coming next week.

The S&P 500 reported blockbuster earnings growth again in the second quarter of 2018. With the corporate tax cut boosting profits this year, we were curious to know how much of the improvement was tax driven and how much was due to the exceptionally strong economy.

The new GICS Communication Services sector being introduced late-September will include members that add considerable buoyancy to the growth rates and valuation ratios of this traditionally defensive, high yield, slow growth industry. As a newly-invented sector, Communication Services has no financial history, and we felt it was important to fill that void.

Herein we include an executive summary previewing our forthcoming, in-depth special report on September’s GICS sector changes. The full report, “A Prehistory of the Communication Services Sector” will be distributed soon.

Our ongoing research into the relative performance of Active vs. Passive fund styles is based on the belief that just as market conditions cycle, so does the active-passive return spread.

Whatever one’s philosophical leaning, the practice of adjusting earnings has left investors with too many watches to consult. We look deeper into the topic of adjusted earnings to gauge the slippage between commonly-referenced earnings clocks.

We have recently been struck by the tremendous valuations being awarded to companies that have never turned a profit. Tesla, Spotify, Workday, and Square all sport market caps above $25 billion based not on their recent earning power (which is zip), but on the hopes that they will one day move well into the black.

Today’s market is barbelled regarding company size, with the mega-cap Tech stocks and the S&P 600 Small Cap index both outperforming the middle of the S&P 500.

Analyzing quarterly financial results and developing insights about upcoming periods is always difficult, but the first quarter of 2018 was unusually complicated.

Value is the philosophical cornerstone of many legendary portfolio managers and is widely recognized as one of the most robust quantitative investment factors. Yet, despite its compelling conceptual merits and long-term record of superior returns, recent years’ underperformance of Value has lasted long enough to weigh on even 10-year performance records. 

The 2017 run that pushed the nine-year bull market to all-time highs made it very difficult to find anything that looked cheap, and few choices that looked average. Even the Tech bubble of 1999 allowed investors to find moderately priced stocks among the mundane old-economy companies...

Are Utilities defensives, or are they interest rate plays, or both? We believe the driving influence fluctuates based on market conditions, specifically fear, and the desire for protection in down markets.

After performing amazingly well in the record-setting bull market run since 2009, defensive equities are once again drawing attention for their traditional role as hedges against a continuation of recent market declines.

Ten weeks into 2018, we have already seen three mini-cycles in U.S. equities. A rip-roaring surge in January was followed in early February by one of the shortest corrections in history...

This months-long research effort culminates with this commentary as we lay out our thoughts on factor rotation and introduce The Leuthold Group’s recently launched Factor Tilt strategy.