We're in the era of disruptive innovation, where whole industries get gutted and replaced by the next big thing. For example, the iPhone disrupted a long tail of physical gadgets, from voice recorders to rulers, calendars and Rolodexes. Amazon disrupted retail and on-premise enterprise computing. Tesla is disrupting the automakers, energy companies, ride-sharing networks, etc., all while transitioning us to carbon-free energy. Square + Bitcoin is disrupting the banks, payday lenders, small business accounting, etc.<p>The returns I've gotten investing in disruptive innovation, just since March, have yielded many times the returns of the S&P 500.<p>(See also this argument against value investing: <a href="https://www.youtube.com/watch?v=2A-TVLyYY9c" rel="nofollow">https://www.youtube.com/watch?v=2A-TVLyYY9c</a>)<p>How is "value investing" not going to just lose a lot of opportunity in the roaring 2020s? It is obvious, and widely known that the Fed Put is going to continue for years. What is special about the <i>particular</i> companies that Gemalpha invests in, and why should I trust that?
How can you be confident these companies are undervalued? I feel like if you really had a good system, you could capitalize heavily directly by taking aggressive options positions in them.<p>Making a claim like "these companies are undervalued" requires strong evidence, in a field so rife with bogus claims.
Unfortunately, the same rule that applies to shorting overpriced companies ("The market can remain irrational longer than you can remain solvent") also applies to going long on underpriced ones. They can remain underpriced indefinitely.<p>The formula is reasonably well founded, as far as it goes. Take the cash and debt into account, figure that as a ratio to past revenue, and you can figure out what a stock "should" be worth -- if its revenue persists.<p>But the stock price may not reflect that for a lot of reasons. A value investor should look into the market, management, and other broader conditions as well. This is a decent metric to start with -- one that you kinda don't need to pay them $200 a year for. Especially since a value investor would buy and hold.
I think you have typo at <a href="https://www.gemalpha.com/#backtest" rel="nofollow">https://www.gemalpha.com/#backtest</a><p>It should be "Max drawdown" instead of "Max drowdown".