From Frustration to Freedom: The Birth of TheValueVantage.com
Discover How Personal Challenges and Advanced Analytics Inspired a New Way to Invest.
Hey there! If you've been with me for a while or just clicked in for the first time, I've got something special for you today. I’m going straight to the heart of what TheValueVantage.com is and showing its evolution. Grab your coffee, because I share some perspectives I haven’t talked about yet.
Imagine a journey where every turn reveals a new horizon, and every step moves you closer to understanding.
Investing goes beyond the simple mantra of “buy low, sell high.”
The reality is more complex, much like peeling an onion that brings unexpected tears.
Here is the essence of a longer list:
Decide what sectors or companies you are interested in
Get the company’s financial data
Read a lot
Understand what you read
Extract the relevant data
Interpret the relevant data
And decide whether to buy
You quickly realize that there are thousands of stocks you could look at today, tomorrow - basically all around the clock.
In short, the workload is immense, because there are a lot of manual tasks which makes it a time-consuming process. And then always another thing happens.
Life happens, and at least I stumbled from time to time and lost track of my investments. The manual process of managing stocks was time-consuming and felt like handcuffs in my already stressful life.
That clashed with my vision of liberty, despite a rewarding career and good income. This realization was my first step toward clarity.
The second step was more expensive
I tried a lot and paid a tuition fee of roughly $50,000 that went through the chimney.
The highlights:
Day Trading – too stressful and didn’t fit my lifestyle
Trading with technical analysis – too unreliable and too time-intensive
Following expert newsletters – I was always too late, and that stressed me out
Options Trading – lost a lot of money, because I only guessed aka gambled, and therefore too stressful
Dividend stocks – slow investing and relaxing. But the returns could be better (on average I want to be at least as good as the market). I still do it.
Fundamental analysis – worked ok, but very time-intensive
Commodity trading – never did it, because I learned the hard way, that if you don’t fully get it, don’t do it.
Automated my fundamental approach with code, statistics, and AI to develop a rolling 12-month strategy. Works the way I want and it perfectly fits into my life, because I get the biggest bang for the invested time.
I had to go on a lot of first dates before I found my “best” way of investing.
The key learning was:
Your investment approach must fit your personality, otherwise you don’t stick to it.
Building an Alternative
Many investors have given up on navigating this complexity, turning to ETFs—a new and convenient market. They invest in ETFs targeting indices, sectors, or regions, settling for average returns.
Frustrated with the inefficiency of traditional investing and the generic outcomes of ETFs, I set myself on a mission to bridge the gap between average and above-average returns.
The goal was simple:
Offer insights that empower the average investor to achieve notable results.
But let’s start at the beginning.
We have two sides of the market. Below average and above average.
And the distribution curve is not like this.
It’s more like the picture below. Where just a few on the right side earn above-average returns.
Studies say that most retail investors (the everyday Joe’s and Jane’s) are on the left side of the curve - below average. I was part of that group, but I wondered what it needed to get to the other side.
Here is what I found out:
Professionals see the market differently. They dig deeper and look at things in a way that gives them the inside view, leading to smarter choices and, more often than not, better profits.
But how do you get there?
I started coding.
Decoding the market felt like stepping into a secret room. The picture below reveals the market’s heartbeat—throbbing with varying pulses of activity, ever-shifting, always elusive.
For us regular folks, it’s like trying to catch a movie by only watching the 2-minute trailer.
This got me digging even deeper into the market and trying to figure out what the big shots are doing.
The following is something I haven’t talked about in public yet, but I guess it’s beneficial to understand the decisions I’ve made along the way.
One of my next theses was, that there must be (a) market leader(s) (call them market makers) and market followers. My goal was to find the ultimate market maker. I wanted to figure out who the leader is and who just follows.
So, I mapped the market to bring connections to the surface. I started with the Dow Jones. The picture below shows a complex web, highlighting who invests in whom. As you can see, there are plenty of connections between these guys.
The picture was an eye-opener for me, but it only pieces together part of the story. What it doesn’t show is when these players began investing in one another, the timing piece of the puzzle was what I was up to solve next.
The information is available, but it's challenging to put it together. I downloaded a big chunk of data from the SEC and started to sort and aggregate it.
I was curious if there were patterns and if I was able to identify first movers and followers.
How it went
It got messy, pretty quickly, because the devil is always in the details. I studied how big funds and investment companies do business. With every detail I uncovered, one thing became increasingly clear.
These market movers don’t play by the same rules as the average Joe simply because they can’t. They’re bound by a thick book of guidelines and regulations. These rules aren’t just about maximizing profits; they’re more like directives for controlling the massive rivers of money they manage. It’s a whole different game when you’re overseeing mountains of cash.
This isn’t just any money—it’s the money that moves markets. The big players, these market makers, cannot put their money into smaller companies, not by choice but because of rules.
And here’s where the tables start turning in our favor. The real growth, the kind that can multiply an investment, say tenfold, often happens with smaller companies. While giants like Apple might not see such explosive growth anymore, for these smaller companies, it’s not just possible; it’s almost expected from venture capitalists. I touched on this in an early article, where I explored the various phases a company typically goes through.
After a few weeks, a thought gently tapped me on the shoulder.
“Even if you find that market leader, you’re still another follower, right?”
Realizing that, and even with all this digging, I wouldn’t truly understand their investment logic. Plus, any data I could get my hands on, especially from the SEC website, was already six weeks old.
It was a sobering moment, recognizing the limits of chasing after these market giants.
An Overwhelming Market
The problem is that the stock market is a massive ocean, and navigating it can feel overwhelming. The struggle is real.
Even if you’re sharp enough to evaluate a stock in just five minutes, you’re still no match for a computer. By the time you’ve finished your analysis, it’s already outdated.
In reality, your insights are probably at least six weeks behind the current market conditions, making your analysis a shaky foundation to bet the farm on. The path to better returns, it seems, requires a boost from technology in one form or another.
So, it was back to square one for me, looking for a smarter, less exhaustive strategy. As an engineer at heart, I’m driven by a desire to understand how things work from the inside out.
The best way to do that? Dive in and do it myself.
I began by coding Joel Greenblatt’s Magic Formula, a strategy that filters the market based on two key metrics. Its performance was a game-changer in the ‘90s and early 2000s, delivering impressive results. Fast forward to today, and its returns are just average, landing me at yet another dead end.
But I liked the theory, and it sparked an idea
Let’s start with an analogy.
Think about hunting for the perfect used car. What makes it a catch? It’s about finding a vehicle that’s priced right for its mileage, with bonuses like leather seats that add a bit of luxury. Fewer previous owners and a clean history free of accidents are also key. Plus, consider the current market conditions for used cars.
Knowing the questions to ask is one thing, but understanding what to look for—the signs of past accidents, the subtle hints a car gives you about its history—is another level. These factors are what you might use to judge if a used car is worth the investment. Of course, everyone has their checklist based on what’s important to them, but you get the gist. (Back in 2015, I’ve even written an entire ebook on this subject.)
Now, let’s apply this analogy to picking stocks. Just like with used cars, there are certain criteria and signs to look for that might show a stock is a “good buy”.
It’s important to note that I will not spill all the secrets of my method. Here is why. Just like what happened with Joel Greenblatt’s formula, if everyone knows how it works, it loses its effectiveness. And that’s the last thing I want—for me and for those who already committed.
So, let’s zoom out to a broader perspective.
Let’s start at the space level
You can do:
Technical analysis
Fundamental analysis
Sentiment analysis
Eliot-waves
And many more
My initial strategy was to combine momentum investing, growth analysis, and fundamentals (you can find the in-depth discussion here).
The outcome?
It was effective, yielding a 14-17% annual return over the past 26 years. Yet, my target was always to hit an average return of 20%.
So, I went back to the drawing board again.
The conclusion from my first strategy was simple yet profound: stock price movements are primarily driven by fundamentals. Everything else tends to be noise. But the real challenge is identifying which fundamentals matter the most. The investment world is cluttered with theories and jargon, creating a dense fog around the essence of successful investing.
Fortunately, Substack is rich with insightful substacks that cut through the clutter.
One resource that stood out was Benjamin Graham’s “Security Analysis”.
It’s a classic and a cornerstone book that sheds light on the complexities of the market. One specific graphic from this book was enlightening and made things click, helping to clear away much confusion and bring a fresh perspective to my understanding.
I dug even deeper into the fundamental stuff and expanded my knowledge because, as it says, they are fundamental.
One thing I found out after reading a lot of investment books is this.
No one will hand you a surefire formula that’s guaranteed to work.
I dedicated over 4,000 hours of coding in the past month alone, sifting through the data to uncover the combinations that provide a reliable signal.
My method, refined through back-testing with 26 years of data, shows promise to achieve an average annual return of 20%, though I expect a slight performance dip after excluding penny stocks from the analysis. Yet, maintaining an average 20% return rate remains a realistic goal.
Is my program always right?
Certainly not. It’s accurate about 70% of the time, which is quite good, if I may say so. The remaining % accounts for:
News impacts
Market sentiment toward specific stocks
Human psychology
Management styles
And more.
This unpredictability is why I’ve spent so much time exploring psychology in my other articles. Understanding the human element behind the numbers, especially our mind and our thought processes (still the weakest link), is just as crucial as the data itself.
TheValueVantage.com
TheValueVantage.com serves as a beacon in the dense fog of investing, providing a clear snapshot of the market’s hidden stars, every day. Think of it as your personal market X-ray machine, pinpointing potential winners. Every night, the system goes to work on over 4,500 US stocks, curating a list of 25 standout stocks to streamline your investment choices.
(Btw AMR was a stock the algorithm found back when its stock price was in the area of $65.)
TheValueVantage does the bulk of the legwork for you, laying a solid foundation for any further analysis you might want to undertake. For those who would have followed our research insights, here’s a glimpse into the returns you could have enjoyed when you would have done the rolling 12-month cycle.
It might sound like a pitch that’s too good to be true. And in reality, even with the best companies, circumstances can change, potentially affecting stock performance negatively. Despite these uncertainties, I maintain a firm belief in the algorithm’s ability to outperform most professional investors in the long term. Its strength lies in its unbiased selection of stocks, free from any personal prejudices, corporate politics, or personal agendas that might skew human judgment.
So, while it’s not flawless, it’s a significant improvement over traditional methods I’ve used in the past. Achieving a 20% return is not just optimistic; it’s a testament to the method’s effectiveness.
The algorithm identifies and capitalizes on fundamental patterns in the market that have shown consistent behavior over time. Drawing on data spanning the last 26 years, which includes three major financial crises, it’s clear that the algorithm’s performance isn’t immune to market downturns.
However, its design allows for a swift recovery from such setbacks because it adapts, enabling it to significantly outperform the market over the long haul.
This is not for everyone
I’ll even say that this approach isn’t suitable for anyone with an investment horizon shorter than five years.
Here’s why:
The service operates on a 12-month rolling cycle. The process involves buying a set of 25 stocks, holding them for 12 months, and then selling them to purchase a new batch of 25 stocks, repeating this cycle annually. This means you only need to adjust your portfolio once a year.
A lot can change in that timeframe, but over a span of 26 years, it becomes clear that even financial crises are relatively short-lived disruptions rather than the norm.
And while Warren Buffett famously advised against losing money, even Berkshire Hathaway’s stock performance isn’t a straight line upwards. Take advice with a grain of salt, understanding that no investment strategy offers a guaranteed upward trajectory without some risk and fluctuation.
Why does this matter?
It’s because we tend to magnify the things we concentrate on. If your primary focus is on “not losing money”, there’s a high likelihood you’ll overreact to market movements.
Market ups and downs are part of its nature and inevitable. Or do the ETF folks who put “everything on autopilot” sell their whole portfolio when it goes south? No. They scream “Buy more”.
Usually, you get nervous, because you have invested too much money - money you can’t afford to lose. That’s a poor move, and easy to correct - just reduce the amount you’ve invested and you will immediately sleep better. And the more money you have, the more money you will put into the market and still sleep well.
Study the insights from an article I wrote, where I explored the consequences of rigidly applying a 5% stop-loss strategy. This approach can save you money, and at the same time, it also diminishes your returns. Why? Because if you’ve invested in a solid company, the odds of it remaining solid are quite high. Stock price and company value are two separate things and that’s the reason we can make money in the market.
The article shows that most stocks found by the algorithm recovered, even after taking a dip. This pattern underscores the resilience of quality investments over time and challenges the first instinct to cut losses at the first sign of a downturn.
This is what reality in 2001 looked like for the 25 selected stocks.
And that missed profit results from a rigid stop-loss approach that a lot interpret as “Don’t lose money”. Your time horizon in the market counts more. And there is so much more out there.
Stocks aren’t life
Life’s about so much more than just poring over stock charts, babysitting, or micromanaging your portfolio. That’s where TheValueVantage steps in to make your life easier – I built it to mesh with the reality of the demanding modern life most of us are living.
All the hard work and late nights were for a single purpose: to create something that could help us leap over the usual hurdles to better returns.
I had one thing in mind while starting this project: I would be investing my own money with it. And now, it’s almost ready for anyone who values a straightforward, data-driven way to invest.
The Side Effect
As a side effect, another headache that often flies under the radar got tossed out the window as well.
I used to subscribe to many investment newsletters, shelling out a good chunk of change. The last one was charging $1,000, ok $999 a year.
Even though (most of) these newsletters put in a lot of effort and thorough research, there was always this stubborn problem. It felt like having a pebble in your shoe. They’d dish out the same picks to everyone. By the time you jumped on board, the portfolio had already made its gains—gains you’d missed out on. So, you’re left chasing the new recommendations.
But here’s the thing: every subscriber is doing the exact same thing, buying and selling in unison. This herd movement inevitably impacts prices. Fair? I doubt it.
Here’s the thing we all know too well: the market is a living, breathing entity that shifts each day, constantly throwing up new opportunities for entry. Traditional investment newsletters are not built to capitalize on this dynamic. It’s not about throwing shade at their effort; it’s just the reality of their limitations. They’re stuck in a semi-manual research loop that, while definitely commendable, inherently caps. By this nature, every day, every week, potentially fair entry points pass by.
Therefore, TheValueVantage.com is by nature designed for anyone to step into the market at any time, with the odds evenly stacked because here, we’re not elbowing against each other by design.
For instance, once I make my moves and set my portfolio with the 25 stocks, I won’t touch it for another 12 months. That leaves at least 249 trading days open for others to enter, unaffected by my actions or anyone else’s. And even if the daily stock lists partly overlap for some days because the market moves are not digital, or when I share it with a few individuals on the same day, the ripple effect is negligible compared to a newsletter influencing hundreds, or even thousands with the same advice.
You might wonder:
Can I expect an average return of 20% all the time?
It’s a valid question. To be fully transparent, based on my research, the answer is no. The market is full of variables, making it impossible to promise a fixed return rate.
The average is always produced by the time in the market.
The actual performance will therefore vary, sometimes more, sometimes less.
How big is this variation?
That’s a great follow-up question, and I will provide a detailed answer in a few weeks. I’m soon crunching the numbers for a day-to-day, 12-month comparison over the last 26 years. This analysis will offer a clear view of the potential range of returns, a level of openness I’ve yet to see elsewhere in the market.
One of my guiding principles is:
Dream, but stay grounded in reality.
I’m not in the business of selling pipe dreams; I’m here to offer you a real slice of reality. This tool, including the return simulator I’ve developed, is about giving you transparency. Once I finish the final training of the algorithm, the results of these simulations will be openly available to anyone interested. This commitment sets it further apart, aiming to provide you with clarity.
Why it Matters?
Behind every number and every strategy usually lies a deeper why: for most of us, it’s the pursuit of freedom, whatever freedom means for you. TheValueVantage.com is more than a tool; it’s a companion toward that goal, designed to empower you with transparency, knowledge, and confidence.
The Opportunity
Historically, these kinds of tools and insights that can significantly impact investment outcomes were only available to the ultra-wealthy. The average retail investor simply didn’t have access to this level of information and analysis.
A big part of the barrier? The cost.
Investment firms typically charge wealthy investors a flat fee of about 2% of their invested capital, in addition to taking a hefty 20-30% share of any profits earned. To put that into perspective, on a $100,000 investment, that’s a minimum base fee of $2,000 annually, and for those investing a million dollars, the fee skyrockets to at least $20,000 each year.
So, where do these whopping costs come from?
Take the Bloomberg terminal, for instance, a cornerstone resource, some even call it the gold standard in the financial world, which comes with an overwhelming annual price tag of $28,000. While it’s packed with data, it doesn’t do the legwork for you. You still need specialists to sift through and analyze all that information. These analysts command high salaries, adding to the cost. Then there’s the infrastructure and the computing power required to process and analyze gigantic amounts of data, not to mention the significant overhead costs these financial firms have to manage.
This financial structure effectively kept the door closed for individual investors who couldn’t afford these steep costs, maintaining an exclusive club for those with deep pockets.
Running TheValueVantage on cloud infrastructure is a substantial investment. Crunching numbers for over 4,500 US stocks nightly isn’t cheap. The computing power needed to sift through all that data and deliver actionable insights is significant. Yet, my goal is to offer you convenience and value that’s hard to come by.
In a few weeks, everything will be up and running.
Here’s something special for my annual paid subscribers: you’ll get a discount as a thank-you for being part of this journey.
Now, you might wonder, “Paying to get a discount? How does that work?”
Well, there are two reasons behind this, starting with a less obvious one.
Reason #1
Substack may be a smaller platform (for now), but the value it provides is unparalleled in social media.
Think about your usual online reading experience—ads and pop-ups can be incredibly disturbing. Substack is different, it offers a shelter from the noise, a place where you can focus solely on content.
I am sure one of their core values is:
Be the change you want to see in the world.
Substack’s infrastructure has been a massive blessing to writers, myself included, and readers. While TheValueVantage is built outside of Substack, I believe in giving back to the community that has supported me and to the people who built this place.
It’s only fair that everyone involved benefits, including the creators of this incredible platform. We shouldn’t take such a place or resource for granted; instead, we should be grateful for the clean, focused environment it provides for readers and writers alike.
Reason #2
I’m not looking to maximize sales at all costs. And I don’t even want to sell to everybody but rather cultivate a community of like-minded long-term investors. The right people who share similar values.
The benefit for paid annual subscribers goes beyond the cost of an annual subscription to ensure it’s genuinely beneficial. My current annual subscription fee is $40, similar to a supportive “buy me a coffee” gesture.
However, it comes with a 20% discount on the annual $599 fee for TheValueVantage service, effectively reducing your total cost if you choose to use it, to $519.20 = ($599 - 20%) + $40. This setup offers a net benefit of 13.2%, which remains as long as you’re a paid annual subscriber.
I aim to add value to both Substack and TheValueVantage.com. While most of the articles will be free, paid subscribers gain preferred, direct access to my inbox and exclusive market insights after I’ve started the service.
If you’re a content creator, and your audience could benefit from TheValueVantage, a hand-picked affiliate program is also in place. This allows us to grow together, ensuring everyone is involved based on shared values, from fair kickbacks to recurring revenue. Here, I’ll follow the same principle.
Quality is more important than quantity.
The journey with TheValueVantage is just beginning, and I’m excited to share future developments with you.
Why I’ve started investing at all?
Most of us work FOR a company, trading our hours for dollars. Given that time is a finite resource, increasing our income means either working more hours or earning more per hour. But there’s a ceiling to this approach.
Enter Compound Interest: The Eighth Wonder of the World
However, even this wonderful tool has its limitations for the majority. Investing in the S&P500, for instance, yields an average return of 8-10%. Frankly, that rate won’t turn into a windfall unless you’re able to invest a significant sum, which is a stretch for many who earn their living as component labor in the corporate machine. While the power of compound interest is accessible to all, its impact is confined by these average returns, offering only a modest boost toward financial freedom.
But what if we could double that to 20%? The compounding effect on returns becomes exponentially more significant, as demonstrated by the return simulator.
Even though the data might be considered hypothetical and I’ve marked it as dummy data, it’s based on the outcomes of one of my earlier algorithms, which averaged about 17%. Observing the stark differences in potential earnings, it’s worth pondering the impact on your financial liberty.
That’s the driving force, aptly named Liberty Lift.
It’s more than just an investment strategy; it’s about elevating our chance to earn more, by leveraging the power of code and compounding returns.
The real opportunity is, that we start letting our hard-earned money work for us. These returns are generated with a one-time investment that is just rolled over and over again as long as you wish. There is no need the add money each month, although, and of course you still can, but you get my point.
The Essence of The Mission
In these uncertain times, where stability seems more elusive than ever, we’re reminded that the only real safety net is the one we build ourselves. My faith in what I’ve created isn’t just business—it’s personal. It stems from a belief that we all have the power to alter our lives for the better.
Coming from a family of diligent immigrants, I’ve seen the embodiment of effort and dream realization.
My parents, both retired, who raised four children and now own a home near the beach from virtually nothing, have shown me the value of perseverance. Though not all their ventures were lucrative, like the gym that barely made a net profit of $900 a month, their step into real estate allowed me to witness the magic of compound interest firsthand.
That experience solidified my love for the concept, showing me that smart decisions could make work not just necessary but fulfilling. Though real estate wasn’t my calling, I found it in stock investing.
I wish you discover your own “compounding place”—that sweet spot where you feel confident and get the freedom you wish for.
I read this great quote and I try to paraphrase it.
“Remember, sadness often stems from feeling trapped by a lack of options, a sense of helplessness. Whenever I encounter this feeling, I remind myself, “This isn’t sadness; it’s ignorance. It means there’s something I don’t know yet.
And knowledge is within my control.”
This quote is so empowering, that’s why it’s hanging on the wall right next to me.
Find the knowledge and your compounding place.
Now what?
Here’s what you can do now:
Share this vision with friends who have your ambition.
Become an annual subscriber to access exclusive insights and benefits.
And finally. Give this piece some love and hit that heart button.
Progress
I’ve developed this pie chart, where StockStars will see the industry composition for the current day the algorithm produced. That way, they get a feeling of how the stock list is composed today and it might help with the decision to enter.
I created a couple more templates, but the outcome is so-so. I’m not satisfied yet. Will have to tweak it further.
Tweaked the macro inflation indicator further and dug into more details.
Plan
Today is a special day. We’ll celebrate the birthday of my lovely wife today! Send her some love :-)
What’s on my head
My wife and I went through a lot of sh*** in the seven years we have been together. Ranging from car accidents and many more. It all brought an even closer. I’m happy she entered my life, I wonder why it to so long until I found her. Happy birthday my love :)
Nuggets I’ve enjoyed
- makes amazing content. What I love even more about them, is their ability to reflect. Very rare in these days.
And Maverick the high flyer shared an amazing summary about bonds.
And you should subscribe to Ray Dalio’s newsletter. This guy is amazing.
Have a great day StockStar!
Hit that heart!
Michael
If you think somebody should read this, share it, and make them happy.
Recommend The Economy Rocket to your readers and friends
I share my stock investment story without sugarcoating – you get the good, the bad, and those tricky ego trips. I'm developing a service with a mix of smart code and proven investment strategies, making stock analysis a thing of the past if you wish. Because life offers so much more beyond the confines of stock analysis.
Disclaimer:
The information in this article is my personal opinion. I’m not a certified investment professional. It is not consulting, nor does it constitute investment recommendations.
I do my research carefully and follow my personal investment strategy.
The stock market is a complex building with its own rules. There are no rules set in stone, like the rules of physics.
Therefore, use the contents of this newsletter at your own risk and do your own research as well. Investing in the stock market can lead to a total loss of the capital invested.
I still don’t get it fully. But I downloaded EToro in July (seemed the easiest to use) and then didn’t do anything for a month.
Just watched and read peoples posts.
I decided dividends was the way to go and now each month I’m adding to companies that pay a dividend.
I’ve got 2 watchlists that are full of companies that pay them. These I learned from when other people posted that they were getting a dividend that day.
I’m learning more and more every day but I like the way I’m doing it at the minute.