Quant Investing Review: The Best Stock Screener for Quantitative Investing

Is the Quant Investing stock screener really worth the money?

Can you really make that much money from their quantitative models?

Today, I’m going to answer these questions for you – as a former hedge fund manager accustomed to quantitative trading.

What is Quant Investing?

Quant Investing is a stock screening platform and newsletter service specifically dedicated to quantitative investment strategies.

It was developed by Tim du Toit, who, after leaving his banking job in 2012, was dissatisfied with other stock screeners on the market at the time.

Specifically, they didn’t include the following features:

• Companies on developed markets worldwide
• Large to nano cap companies
• Lots of valuation ratios (based on profits and cash flow)
• Lots of quality ratios
• Lots of share price momentum ratios
• Market value (in different currencies)
• Average daily traded value (in different currencies)
• Magic Formula values

So, after teaming up with one of his friends, Tim sought to rectify this by creating Quant Investing in 2014.

Having spent his career in fund management and the financial markets, Tim was accustomed to its ups and downs. He’s the first to admit that he’s made every investment mistake there is.

Keen to find a better method of investing, he spent a lot of time researching successful strategies that have worked over the long-term.

Over the years, he has narrowed these down to a select few, which he documents in a free 53-page research report called: “What works on European Markets – The Best Performing Investment Strategies”, as well as on the Quant Investing website.

These quantitative strategies are the key focus of Quant Investing and form the basis of the stock screener and newsletter services.

The intention is to educate investors about this style of investing and make it easy for them to incorporate it into their own investment process.

For the first time, investors like you have access to the most profitable investment strategies in one place. The research, the data, and ability to implement them in a few simple clicks.

In that respect, the quant angle is what really differentiates it from other stock screeners out there.

Quant Investing Pricing

Quant Investing offers 3 different products: Screener, Quant Value Newsletter, and Shareholder Yield Letter.

Note, these can be purchased separately or together at a discounted price.

At current prices, it costs less than a lunch for two each month. And what’s more, if you’re not satisfied within 14 days, you get your money back – no questions asked.

Quant Investing Features

Ok, now you’ve got the gist, let me show you how it works…

Platform Overview

You access the Quant Investing screener directly through their website. There is no software you need to download, so everything can be done through your internet browser.

Everything you need to get started can be accessed from the homepage menu.

This makes it an incredibly simple and user-friendly platform to navigate.

The “Strategies” and “Blog” tabs are where you will find all of the educational content you need to get up to speed with quantitative investment strategies.

The image below shows just a handful of the strategies that Quant Investing have backtested and found to be the most profitable.

Some of these come from their research report, and others have been added over the years through their ongoing research.

As you can see, some of the returns have been quite phenomenal. By clicking on any one of these strategies, you are taken to an article explaining the investment process and backtest results in more detail.

Quant Investing Stock Screener Review

Once you have a feel for the kinds of strategies you like, it’s time to implement them through the stock screener.

You access this through the arrow icon on the far-right of the homepage menu.

The video below shows you what it looks like when you get inside.

Extensive, high-quality data

Given Tim and his team use the screener to invest their own money, they make a point to ensure that the data is of the highest quality and up-to-date.

The stock screener database has over 22,000 companies in 36 countries (all developed markets worldwide) and more than 110 investment ratios and indicators.

This covers pretty much every company on the exchanges, as well as pink sheet companies in the US (although the data is a bit sporadic for them).

As well as the basic metrics you expect from any screener like the P/E ratio, the stock screener also has more complex ratios pre-programmed.

Most of these are inspired by the strategies outlined on the website.

These ratios include:

• Free Cash Flow Yield
• Magic Formula Investing
• ERP5
• Value Composite
• Qi Value Ranking
• Gross Margin Novy Marx

For the full list of ratios and their definitions, check out the online glossary.

Other Screener Variables:

• Sectors – As you can see from the video above, there is an extensive list of sectors and subsectors that you can narrow your focus to.
• Currencies – The currency setting applies to daily trading volume and market cap. You can choose between 5 different currencies: EUR, GBP, USD, JPY, AUD.
• Financial Statement Date – This filter allows you to choose how up-to-date a company’s financial statements must be.
• Daily Trading Volume – The minimum daily trading volume threshold.
• Market Cap – The minimum market cap threshold.

Multi factor screening

The great thing about this screener is that it allows you to filter across four different factors.

You simply select up to four ratios and move the slider (in 10% increments) to choose the range of companies you want to include.

For most metrics, the lower end of the range gives you the highest ranked companies. However, double check in the online glossary.

For example, restricting the range to 0-20% will give you the top 20% of companies for most metrics.

Repeating this across multiple factors ends up resembling a funnel, akin to the diagram below.

Pre-defined screens

If you aren’t comfortable inputting criteria yourself, you have the option to automatically run any of the pre-defined screens mentioned on the website from the ‘Load’ menu (see video below).

This means you can implement the strategies of sophisticated quant funds in just a few simple clicks.

Custom output columns

By choosing which output columns to display alongside your screener results, you can refine your screens even further.

1. The easiest way to do this is to create a custom template. You do this by clicking the icon next to the first arrow in the screenshot below. Choose the ratios you want to display and save. Creating a template is the best option if you’re going to be using the same data columns over and over.
   
   
2. Alternatively, you can click the icon next to arrow 2. This is called the ‘Column Chooser’, which brings up the menu in the bottom right of the screen. Scroll down and tick the boxes of the ratios you want to show.
   
   
3. The third arrow shows how to impose thresholds on specific ratios. In this particular case, I’m looking for companies that have a Piotroski F-Score greater than 7. Type 7 into the box, click the magnifying glass, and select the ‘greater than’ option in the drop-down menu.
   
   
4. With the stocks that are left, let’s say I want to know which ones have seen the greatest price change over the last 6 months. I can do this by sorting from highest to lowest in the last column. Just click the ‘Price Index 6m’ box until the arrow points downwards.

After experimenting with the output columns and four sliders, you will quickly realise how flexible this screener is. There really are an infinite number of ways to slice and dice the data.

Backtesting

There is a backtesting feature in Quant Investing, however it isn’t my favourite.

Mainly because there is lot of manual work you need to do yourself.

For example, it doesn’t rebalance the portfolio for you automatically. Instead, you have to run multiple point-in-time screens through the “Historical Screener” function, and calculate the returns yourself in excel.

If you were looking to rebalance monthly, this would be an arduous process. It is really only suitable for annual or semi-annual rebalancing.

Additionally, the data only goes back to 2015, which isn’t long enough to get robust results in my view.

Quant Value Newsletter

Now we’ve covered the stock screener, it’s time to move onto the second product Quant Investing offers: the Quant Value Newsletter.

This is how it works.

Each month you get sent up to 6 investment ideas: 2 from Europe, 2 from North America, and 2 from Asia, with very easy to follow instructions (buy/sell recommendations all on the first page).

This means managing your own very successful portfolio won’t take you more than half an hour per month.

If they can’t find 6 high-quality ideas with a good chance of outperforming the market, they will recommend less. They don’t send you ideas just for the sake of it, which I think shows great integrity on their part.

The investment model draws from the 10 best investment strategies in their research paper and the backtests they do on a regular basis – which have an average return of 881% over 12 years.

Not only that, but the model has an impressive track record in the real-world too.

Out of a total of 492 recommendations (up until Dec 2022), 61% gave you a positive return, with an average return of 21.1%, and maximum return of 315.5%.

So, if you don’t want to spend a lot of time on your investments, but want to follow an understandable, time-tested investment strategy, this newsletter is the product for you.

To find out more about the Quant Value Newsletter, including its cost and investment process, simply follow this link.

Shareholder Yield Letter

The third and final product that Quant Investing offers is the Shareholder Yield Letter.

This is a recent addition to the Quant Investing lineup, designed to address a common issue faced by subscribers to the Value Newsletter:

“I really like the Quant Value newsletter, but it is REALLY hard to buy the companies!”

You see, the original newsletter imposed no market cap constraints on the companies it recommended. This is no problem if your broker gives you access to small-cap companies all over the world. However, many don’t, which means you can’t fully implement the strategy. Frustrating to say the least!

To rectify this, Tim and his team set out to find a market-beating strategy designed solely for large-cap stocks.

The strategy they landed on takes inspiration from legendary investor James O’Shaugnessy, who found that, historically, companies that returned the most cash to shareholders (dividends & buybacks) outperformed the broader market.

Quant Investing took this strategy one step further, however. In particular they apply this criteria to a proprietary investment universe they call “Market Leaders”.

As you can see in the table below, the results from doing this were stunning!

Now, subscribers to the Shareholder Yield Newsletter can receive regular investment ideas from this very strategy.

All you need to do is follow the link below, where you can find out more about the cost and investment process.

How to Use Quant Investing

I have been using Quant Investing for some time now, and here is how I get the best out of it:

1. Learn the Investment Strategies – To get the most out of this service, you should spend some time learning the investment strategies it revolves around. The best place to start is to download their free 50-page research paper: “What works in European markets?”
   
   Also, the blog has an extensive catalogue of strategies that the team are constantly adding to through their research. As soon as they find a new, successful strategy, they add the relevant ratios to the stock screener. For any metrics that you’re unsure the definition of, the online glossary is always there to help you.
   
   
2. Implement Through the Stock Screener – Now you have an understanding of some different quantitative strategies, it’s time to experiment with them in the stock screener. As mentioned earlier, you can load the screening criteria of any quant strategy on their website with a few simple clicks. If you want to modify them in any way, you can easily change the settings to suit your personal style.
   
   
3. Cross Reference with the Newsletters – Once you’ve generated a list of companies, I find it useful to cross-reference with both newsletters to see if there’s any mutual ideas.

Free Cash Flow Yield Example

One of my favourite strategies on their website is the free cash flow yield.

Probably because I’ve backtested a similar strategy and made money from it myself. In fact, it outperformed the S&P 500 by an average of 7% per year between 1993-2022. Read this article for a more in depth look at my free cash flow yield stock screener strategy.

I’m going to show you how to implement this strategy in the Quant Investing stock screener.

First, let’s remind ourselves of the screening criteria:

• S&P 500 companies
• 10% of companies (50 stocks) with greatest free cash flow yield

That’s it. Pretty simple.

To spice things up, let’s say I want to include a momentum indicator as a secondary factor – which is something Quant Investing suggest you do in this article. The best results came from using the 12 month price change as the momentum indicator, so I’ll use that. I only want to consider companies in the top 50% based on this measure.

Then, from the companies that remain, let’s say I only want those with an ROE greater than 10%.

Watch the video below to see how to implement this.

FAQs

Pros

• Extensive database of stocks – over 22,000 stocks in all 36 developed markets, including nano-stocks in the US
• Simple user interface – platform very intuitive and easy to use. Can implement profitable, time-tested strategies in a few simple clicks
• Access to sophisticated investment research
• Newsletter has a great performance track-record

Cons

• Some basic understanding of quant investing is needed
• Limited functionality compared to some other screeners – for example, you can’t tailor your screens with custom formulas
• Not great for fundamental or technical analysis of individual companies
• Some of the strategies require extra data manipulation in excel

Quant Investing Review Summary

To conclude this Quant Investing review, I would say that the products they offer are very unique. The website, screener, and newsletters form a ‘one-stop shop’ for your quant investment education and implementation. Therefore, if this style of investing appeals to you, it is definitely worth giving a try.

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