Investing · Method
Value meets quant: a personal approach
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Value investing: the core idea
Value investing was proposed by Benjamin Graham in 1934 and refined by Warren Buffett. Buy an asset at a price materially below its intrinsic value, then wait for the market to recognise that value.
Four core principles
- Stock = part of a business — buying a stock means buying a stake in a real company
- Margin of safety — only buy when price is materially below intrinsic value
- Mr. Market — view the market as an emotional quoting service, not as truth
- Long-term holding — a quality business is the friend of time
The classic five-step stock screen (Graham + Buffett)
- ROE above 15% (long-term average)
- Gross margin above 40%
- Debt ratio below 50%
- Free cash flow positive and growing
- Competent management (buybacks, dividends, capital discipline)
Quantitative investing: not the opposite of value
Quantitative investing looks like a different method, but its underlying logic does not actually conflict with value investing. Use mathematics, data, and algorithms to surface repeatable statistical edges from historical patterns.
Four schools of quant
| School | Timeframe | Suitable for individuals |
|---|---|---|
| High-frequency trading (HFT) | Microseconds | Not suitable (datacenter + co-location required) |
| Statistical arbitrage | Seconds to minutes | Hard (small accounts uncompetitive) |
| Multi-factor stock selection | Weeks to months | Best fit for individuals |
| CTA / trend following | Days to weeks | Accessible |
Value × Quant: a combined framework for individuals
The two seemingly opposite systems can be combined in a complementary way. Value investing = stock selection logic (what to buy). Quantitative investing = execution discipline (how and when to buy).
Four-step combined process
- Step 1: Value screen (filter out the bad on fundamentals)
- Step 2: Quantitative ranking (factor-score the rest)
- Step 3: Portfolio construction (diversification + position sizing)
- Step 4: Periodic rebalance (quarterly or semi-annually)
Tools recommended for individuals
- Stock screeners: LiXinger, Xueqiu, Turtle Quant
- Backtesting: JoinQuant, RiceQuant, Guorn
- Valuation: DCF, DDM, relative multiples (most practical)
- Data: annual reports, Tonghuashun, Xueqiu deep articles
Three takeaways
- Value investing × quantitative investing = complementary — one picks the "what", the other picks the "how".
- Individuals do not need to code. Off-the-shelf tools are enough to start.
- Discipline is the edge. Do not predict, only follow factors + rebalance.