The Acquirer's Multiple

This strategy replaced the Permanent Portfolio strategy on 20th Jul 2015, slightly 3 years after its inception.

The premise is simple (and elegant in my opinion):
  1. Buy a basket of the top 20-30 stocks in a list ranked in terms of "cheapness".
  2. A year later, if the stocks falls out of the newly ranked list, sell and replace it with the new stocks in the list. If it is still in the list, continue to hold it.
  3. Repeat step 2 every year.
This strategy backtested over a 60+ year period with a basket of around 60 stocks returned a CAGR of 21%. More details can be found from The Acquirer's Multiple website, and also the book behind it, "Deep Value".

Will be publishing the results soon.

4 comments:

  1. Swan Tham20 April 2016 at 00:00

    Hi,

    I have heard of the Permanent Portfolio for a while and want to do more research before implementing it. Now, I just heard of this Acquirer's Multiple.
    (1) May I know what make you to total replace the method and
    (2) how is the new "portfolio" turn out so far?
    (3) Is it all for US stocks?

    Thank you.

    ReplyDelete
  2. RK20 April 2016 at 21:10

    Hi, to answer your questions
    1) The strategy is a bit too boring for my temperament. This strategy will be more volatile and hence, more "interesting".
    2) Now is around -6% in USD terms
    3) Yes it consists of all US stocks

    I would also like to add the amount allocated is not large compared to my overall portfolio, i.e. it is money that I can afford to lose. Although it is unlikely for its value to drop to 0. I also understood that the portfolio consists of essentially cheap businesses, so there is a basis to invest in it.

    ReplyDelete
    Replies
    1. Swan Tham4 May 2016 at 16:46

      Thank you for the reply. Can I conclude that
      (1)Permanent portfolio is more stable for long term investing with low volatility
      (2)The Acquirer's Multiple is more volatile and more risk and may not be suitable for long term investment?

      I also come across couch potato portfolio which focus on bond and stocks only. Don't realized there are so many types of portfolio until I do more research.

      Delete
    2. RK4 May 2016 at 21:28

      Hi, both are suitable for long term investments. Just that Permanent Portfolio is less volatile (lower returns), and Acquirer's Multiple is more voloatile (potentially higher returns also).

      Delete

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