Factor-based
investment
methodology
There are decades of research — Fama and French, James O’Shaughnesy, Cliff Asness, Mark Carhart, Ben Zack and others — establishing that long-term equity returns are driven by exposures to a small number of persistent factors. Quality. Value. Momentum. These factors aren’t flashy fads, but they are a solid foundation for good long-term stewardship. You could even ask AI.
Quality is essentially: profitable, resilient, financially healthy. We add a social-impact dimension to that definition — biblical alignment — because we believe operating ethically and profitably aren't competing goals. They tend to travel together.
Value is buying something at a discount to underlying value, not wishful speculation. We define it more comprehensively than most factor indexes — we include low volatility and higher dividend yield, which are correlated but distinct.
And momentum is the discipline of confirming with price action what the fundamentals are saying. We incorporate positive earnings trends, so we're not just chasing price.
Our first and possibly the most important step, after screening out for faith-based criteria, is to remove companies that have the worst percentile scores for Value, Growth and Momentum.
From the remaining universe we find the 100 companies, subject to predefined diversification requirement, with the highest combined percentile scores for the 34 sub-factors we use to define Quality, Value and Momentum.
*Reconstitution and rebalance happen quarterly so after each reconstitution and rebalance we believe we have the best combination of 100 faith and factor-based securities.
Wallick Investments' investment methodology, simply put, provides:
• decreased exposure to low quality (financially and morally) expensive companies, lacking price or earnings momentum, with
• increased exposure to high quality companies (financially and morally), selling at a discount with positive price and earnings momentum.
Our end goal is worthy stewardship.
We pursue this worthy goal by establishing investment methodology that decreases or eliminates our temptation towards poor investment decisions based on emotions which are often led by or followed by vices (fear, greed, gluttony, envy, pride, sloth, etc.). The outcome of poor decisions is overexposures to over-priced, low-quality companies, with no real catalyst to increase value for investors or society.
The desired result of evidence-based investing rooted in God’s natural law and virtues such as faith, hope, love, prudence, temperance, fortitude, diligence, humility and generosity, is consistent exposure to high quality, reasonably price companies with momentum to increase shareholder value and help those around them thrive.
Perfect stewardship may be difficult to achieve, but we do all we can to avoid indifference!
For investment methodology details, click here.
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