Your current stock screening method has a flaw. Find out the solution.

Summary

In this webinar, Par, a co-founder of Ban Research, introduces B, Quant, a quantitative investment tool designed to streamline stock screening and enhance returns. The tool focuses on three key factors: growth, quality, and valuation, using mutual fund holdings as a proxy for quality. Par explains the model's simple yet effective rules, demonstrates its historical outperformance, and discusses strategies for managing risk and avoiding bankruptcy-prone companies. The session also addresses questions about the tool's application, exit strategies, and potential adaptations for different market cap criteria.

Takeaways

• 😀 The webinar was hosted by Par, one of the co-founders of Ban Research, along with his colleagues Na and Sanjay.
• 📈 Ban Research was launched in early 2022 with the aim to provide quality research and serve as an extended research team for institutions, family offices, PMS advisers, and investment advisors.
• 🏆 The response to Ban Research since its launch has been overwhelming, with a focus on delivering value to early subscribers.
• 💡 The founders identified a gap in the market for DIY investors who lack the time and resources to generate quality research-based insights, leading to the creation of Ban Core.
• 📚 Ban Core aims to empower investors to make informed decisions by understanding what they own, why they own it, and the risks involved.
• 🔍 The presentation highlighted the limitations of traditional stock screening methods, which often result in an unmanageable number of companies to analyze.
• 🤖 The introduction of Ban Quant aims to streamline the investment process through factor-based or quantitative investing, which can lead to significant outperformance.
• 📉 The webinar discussed the importance of not just chasing growth but balancing it with quality and valuation to avoid poor risk-adjusted returns.
• 📊 The use of the Alman Z-score and Sharpe ratio in the model helps to address risk and reward, aiming to provide a robust investment strategy.
• 📝 The model's strategy involves ranking stocks based on growth, quality, and valuation, which has historically outperformed the market with less drawdown.
• 🔄 The model is updated regularly, and the top 25 to 30 stocks are selected monthly, with the potential to adjust the number of stocks as per subscriber needs.

Q & A

What is the purpose of Ban Research and how was it initiated?

Ban Research was initiated by Par, Na, and Sanjay in early 2022 to deliver quality research and serve as an extended research team for institutions, family offices, PMS advisers, and investment advisors. The idea was born out of the common problem faced by employers in hiring and retaining good talent, especially in core research teams.

What is the main goal of B, Quant in the context of Ban Research's offerings?

B, Quant aims to address the problem of traditional screening methods that yield too many companies to screen effectively. It provides a manageable list of 25 to 30 companies, which have been back-tested for returns, giving investors more conviction in their screening process.

How does Ban Research address the gap for DIY investors?

Ban Research aims to fill the gap for DIY investors by providing detailed reports and insights that these investors may not have the time or resources to generate themselves. The goal is to enable informed decision-making, ensuring investors know what they own, why they own it, and the risks involved.

What is the significance of the detailed reports provided by Ban Research?

The detailed reports are intended to ensure that investors have a comprehensive understanding of the business they are investing in. The level of detail is meant to convey everything that Ban Research knows about the business, allowing investors to make informed decisions.

How does the speaker view the role of automation in investing?

The speaker is a big fan of automating things that can be automated in investing. He believes that factor-based or quant investing allows for the creation of significant outperformance through a structured, simple process.

What is the strategy behind limiting the number of companies in B, Quant to 25 to 30?

Limiting the number of companies to 25 to 30 creates a manageable list for investors. This makes it easier for investors to screen and select potential investment opportunities, thereby increasing the efficiency of the investment process.

How does Ban Research's model address the issue of company quality in investment decisions?

Ban Research's model uses a combination of growth, quality, and valuation metrics to rank companies. The Return on Capital (ROC) is used as a powerful measure of business quality and capital allocation, helping to ensure that the companies selected are of good quality.

What is the role of mutual funds in Ban Research's investment strategy?

Mutual funds are considered 'smart money' in the strategy. The model follows the smart money to capture qualitative aspects of a business that may not be directly captured through quantitative metrics alone.

How does the speaker suggest managing the risk while chasing growth in the market?

The speaker suggests balancing growth with valuation and quality metrics to manage risk. By not investing at absurdly high prices and avoiding low-quality companies, the model aims to catch growth opportunities while controlling risk.

What is the exit strategy for stocks selected through Ban Research's model?

The exit strategy is not explicitly detailed in the script, but it is implied that stocks would be exited based on changes in their growth, quality, and valuation metrics that no longer align with the model's criteria.

How frequently is the Ban Research model updated and how are new stock ideas generated?

The model is updated regularly, and new stock ideas are generated every month. The team works on three to four ideas each month and shares compelling ones with subscribers.

Does Ban Research have plans to provide video content alongside their research reports?

While there are no concrete plans mentioned in the script, the team is deliberating the idea of providing video content to enhance understanding and confidence in their research and quant model.