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Interactive Brokers Group And Global Deep Value Stocks

Ruerd Heeg profile picture
Ruerd Heeg


  • Instead of looking for high-conviction picks, one can also look for statistically favorable stocks.
  • While I invest in high-conviction picks as well, this can actually be dangerous. For most people, selecting stocks on a statistical basis gives higher returns.
  • On a statistical basis, the cheapest stocks are those with high NCAV/Market cap or with low EV/EBIT combined with a strong balance sheet. In the US, these are very rare.
  • When investing globally, there are plenty of opportunities for building a diversified deep value portfolio. These deep value stocks can be alternatives for similar well-known stocks in the US.
  • Sometimes, a pair trade with such a US stock makes sense. In this article, I discuss such a pair trade with Interactive Brokers is the other (short) leg.

The first part of this article is based on the Welcome article of my premium service on Seeking Alpha. In addition, I have added the description of Aizawa Securities discussed in my last low EV/EBIT premium research article. The comparison with Interactive Brokers is new content.

On sites like Seeking Alpha, you find many so-called high-conviction picks. These are stocks and investments that the SA contributor expects to fly high. But life is random, unknown and unpredictable risks exist and stock markets are reasonably efficient. So often, these fly-high predictions don't work out.

Stock market researchers have noticed this decades ago and found all kinds of explanations for why stocks with good stories often don't have great returns. Some researchers even found that doing more in-depth research into a specific stock increases people's confidence, but doesn't increase the accuracy of their investment predictions. See also here.

Useful stock statistics

So, other stock market researchers have worked backwards and tried to find common characteristics in stocks that have performed very well. To do this, they have computed the returns of US and foreign stocks for decades. They did this in great detail. For example, did you know that stocks of companies that don't respond to a question in a conference call perform worse, on average? I regret that I didn't act on the silence when an analyst asked a question about a possible new offering of common or preferred Crossroads (CRDS) stock.

More importantly, they have found that stocks with low P/E and low P/B do much better than the average stock. In addition, they found that stocks with more current assets than liabilities plus the market cap (so-called net-nets) do even better.

How did they come up with the net-net strategy? Well, the great Benjamin Graham already mentioned that net-nets with a

This article was written by

Ruerd Heeg profile picture
As a mathematician (Ph.D.) I use 7 quantitative strategies with statistically extremely high returns. I select these cheap companies with software comparing thousands of global stocks on value metrics, liquidity, quality metrics, and momentum. I focus on global nanocaps and net-nets. Check Turning Rough Stones: turningroughstones.substack.com

Analyst’s Disclosure: I am/we are long DAAT, CRDS, MU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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