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Momentum And Valuation Suggest Good Returns For Otelco

Mar. 06, 2018 9:26 AM ETOtelco Inc. (OTEL)1 Comment
Ruerd Heeg profile picture
Ruerd Heeg


  • A combination of momentum and multiple value factors is one of the best strategies among the 300 strategies described in What Works on Wall Street.
  • Every month I quantitatively rank stocks according to this strategy.
  • According to this month's list Otelco is a good pick on a statistical basis. I describe the company below.

In What Works on Wall Street James O'Shaughnessy describes about 300 quantitative stock investing strategies. He investigates their long term returns and risks. Last year I discovered it is possible (but not easy) to implement many of these quantitative strategies. So these advanced strategies are not just an edge for hedge funds any more but anyone can implement them at home. It can be done by screening for stocks using very flexible criteria. Then export fundamentals and price data for each stock and then rank them on multiple criteria. Finally compute the combined ranks.

One of the best strategies described in What Works on Wall Street is a mix between value and momentum called Trending Value. He ranks US stocks with positive momentum on various value factors and then proceeds with the 10% with the best rankings. These best 10% he ranks on momentum. The 25-50 stocks with the best momentum enjoy high returns (21%) despite low risks (Sharpe ratio 0.9).

I have done something similar, but with various improvements. One of the biggest differences is that I rank on smooth momentum instead of on raw momentum. Smooth momentum suggests many knowledgeable investors are slowly buying into the stock. Therefore smooth momentum serves as better evidence for "wisdom of the crowds" than bumpy momentum caused by a few events. For more details including links to scientific papers see my freely accessible article on statistical investing.

For international stocks I share the details of the best ranked stocks with my Marketplace subscribers. For the much more expensive US-listed stocks I share results here on the free part of Seeking Alpha.


Otelco (NASDAQ:OTEL) has the third best ranking on this month's list. The ranking ignores recent momentum because this is subject to mean reversion. My ranking considers smoothness of momentum but unfortunately

I do not invest in these US-listed stocks since stocks I find with my international screener are much cheaper and therefore have higher average returns. See again my free overview article Use your extraordinary edge with these 2 investment strategies for details.

Join me here if you like having many statistically favorable positions instead of having a few high-conviction all-or-nothing stocks.

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/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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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Comments (1)

You're correct. Follow the cash flow.

Only two months till 1Q/18!
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