Value Investing – Never Buy Expensive Stocks. Period.

Never Buy Expensive Stocks. Period.  by Wesley R. Gray, Ph.D., Alpha Architect  Author, Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors

We did a recent internal simulation study on the performance of cheap and expensive stocks based on a variety of valuation metrics.

We looked at all our favorites from our JPM paper "Analyzing Valuation Measures: A Performance Horse Race over the Past 40 Years:"

• EBIT/TEV
• EBITDA/TEV
• B/M
• Gross Profits / TEV
• FCF / TEV

This research is part of a larger academic paper, but I did want to highlight one aspect of our study that we thought more practitioner-minded readers would find fascinating.

Note: We focus our results on EBIT/TEV because it is...