Value Composite
In plain terms
Cheap is cheap if it shows up across multiple yardsticks, not just one. We rank each company on book/price, earnings/price, cashflow/price, and EBIT/enterprise-value, average those ranks, and prefer the cheapest names trending up.
How it works
Single-metric value (B/M alone, the original Fama-French HML) has been crowded for two decades. Asness-Frazzini 2013 showed that averaging several normalized value metrics (B/M, E/P, CF/P, EBIT/EV) recovers the lost spread. EV-based metrics (EBIT/EV) work better than equity-only metrics on asset-light firms. We z-score each metric over the ticker's own 12-quarter history and average — long when composite z is in the top quartile and trend confirms, short when bottom quartile and trend confirms.
Data dependencies
- Fundamentals quarterly
Quarterly fundamentals (income, balance, cash-flow) from FMP + SEC.
- Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
Expected edge
- Reported return
- ~3-5% ann. long-only; 7-10% L/S (1990-2012 in the source paper)
- Tested over
- 1990-2012
~3-5% ann. long-only premium 1990-2020; 7-10% L/S in the Asness-Frazzini 2013 backtest
Example tickers where this is likely to fire
Illustrative only, the signal fires based on the live data, not a fixed list.
Related families
High-quality stocks (good margins, high ROE) that are ALSO trending up tend to beat low-quality losers. Goes long only when both check out.
Standard value factors mistake R&D-heavy tech firms as 'growth' because R&D is expensed not capitalized. Adding R&D back uncovers hidden value.
Companies that announce (or quietly start) share buybacks beat the market by 3-4% over the next year, strongest in beaten-down value names.
Score each company on 9 boring-but-important accounting checks (positive profit, improving margin, no new shares issued, less debt, etc.). Stocks that pass 7-9 of them are quality compounders; stocks that pass 0-2 are distressed. Long the strong, short the weak.
Explore Value Composite on alphactor.ai
See which tickers this family is currently firing on, with live signals and rankings.