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Picking Stocks: Validea Offers A Refreshingly Different Approach

Elliott R. Morss profile picture
Elliott R. Morss

© 2013 Elliott R. Morss All Rights Reserved

February 2013


It is well documented that picking individual stocks is not a good bet.(1) Market prices do a pretty good job at reflecting all available information, and when new information becomes available, you are not likely to be able to act on it before others. And having more than one stock in your portfolio reduces risk. That is why most people use investment vehicles that include a number of stocks, e.g., mutual funds or indices that reflect a group of stocks, e.g., ETFs.

The Stock Pickers' Club

But there remain a lot of stock pickers. I am one of them. I enjoy beating the market as I did in 2012 with Brookfield Asset Management (BAM +35%). I talk less about picks that don't do so well, e.g., my purchase of Allied Irish Banks before the Irish banking collapse in the second half of 2008. But rational or not, stock picking continues, and for those of you that do it, I urge you to take a look at Validea.

The Evolution of Validea

John Reese, its founder, has an undergrad degree from MIT in electrical engineering (where he got involved in its Artificial Intelligence Lab) and an MBA from Harvard Business School. John became interested in investing, who was good at it and why. He ended up writing a book about them - "The Guru Investor: How to Beat the Market Using History's Best Investment Strategies". In it, he describes the investment strategies of each of his gurus: Benjamin Graham, John Neff, David Dremen, Warren Buffett, Peter Lynch, Kenneth L. Fisher, Martin Zweig, James O'Shaughnessy, Joel Greenblatt, and Joseph Piotroski.

Reese took it further: drawing on his background in artificial intelligence at MIT, he developed computer programs modeling the strategy of each guru. And

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Elliott R. Morss profile picture
Elliott Morss has spent most of his career teaching and working as an economic consultant to developing countries on issues of trade, finance, and environmental preservation. Dr. Morss received a B.A. from Williams College in 1960 and a Ph.D. in political economy from The Johns Hopkins University in 1963. He has taught at the University of Michigan, Harvard, Boston University, Brandeis, and most recently at the University of Palermo in Buenos Aires. For several years, he worked in the Fiscal Affairs Department of the International Monetary Fund. He later helped establish Development Alternatives, Inc. (dai.com), a firm that became the largest contractor to the U.S. foreign assistance program (AID). Since his first IMF assignment in Ghana in 1966, he has worked in 45 countries. He has been the President of the Asia-Pacific Group, a British Virgin Islands for profit company with investments in Cambodia, China, and Myanmar. With Dr. Zhu Jia-Ming, he established Green China, an American NGO with the mission to increase the dialogue in China on the trade-offs between economic growth and environmental preservation. Dr. Morss has co-authored six books and published more than 50 articles in professional journals. He is currently available for consulting assignments.

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