Alpha Baboon Success Story
Systematic Value Investing
What is Systematic Value Investing?
At Baboon, we've crafted a suite of Baboon Indicators specifically engineered to assess both quality and price—details of which can be found in our glossary. glosario.
By leveraging our quality and price indicators, we are able to effectively sort assets within the U.S. market: why buy everything when we can buy only the highest quality companies that are now cheap?
How do we do it?
We built Systematic Value Investing, a technology capable of selecting the best stocks at a good price for a specific market.
SVI is the best combination of active and passive investment: we seek better returns than the market average using a methodological, objective and systematic approach.
Do you prefer ETFs?
Systematic Value Investing focuses on the U.S. market, where there are more than 3,000 publicly traded companies.
If you were thinking of buying ETFs and indexing to the U.S. market, you may not want to buy all the companies.
As Warren Buffett says, "Mr. Market" can be irrational in the short term; and buying everything in the market can cause you to buy shares of many cheap and quality stocks but also shares of companies with little competitive advantage and overvalued.
Only good quality at a good price
Imagine if instead of buying the whole market you could buy only the best stocks in this diagram, the ones that have the best quality and best prices simultaneously.
Moreover, imagine if someone was able to manage your investment and ensure that you are always invested in the best stocks (best quality at the best price), managing the buying and selling for you. This is precisely what we do at Systematic Value Investing.
We beat the market from within the market, buying a selection of stocks highly correlated to the global market with better returns than the market average.
Better historical performance than the S&P500
To test this strategy, we performed backtesting: we sent our algorithm back to the year 1995 and told it to invest following the SVI as if the future did not exist.
The results of our historical simulations were astounding: 16.6% year-on-year return versus 6.8% for the SP500 over the same period.
Diferencia SVI - S&P500
Better even during bear markets
A clear correlation can be seen. During bullish periods and periods of stock market euphoria, the SVI behaves very similarly to the general market.
However, when there bear markets and there is a market correction, being invested in the best companies, which are also cheap, produces the effect of not falling as much as the market average.
Thanks to this effect, we are able to beat the market statistically. There is no precedent in this simulation of not beating the market over time horizons longer than 2 years.
Track record that backs us up
These excellent results encouraged us to use 5,000 euros in a live Interactive Brokers account and test our strategy in real time to put it to the test.
Since April 2023, the SVI portfolio returned 18% in 2023. The return of the SP500 over the same period was 16% and that of our benchmark market (S&P500 EW) was 8%.
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