Quantitative Value Investing with the Fundamental Mapper

Fundamentals 31. The quant strategy that Warren Buffett would approve.

Value investing has stood the test of time. Legends like Benjamin Graham and Warren Buffett built fortunes on it. The idea is simple: find strong companies trading for less than they are worth.

Traditionally, value investors dig deep into financials to judge a company's true worth. But in today's data-driven world, numbers can do some of the heavy lifting. A quantitative approach makes stock selection faster, more objective, and more precise.

One tool that streamlines this is the Fundamental Mapper. It ranks companies by business strength and investment risk, helping investors spot bargains.

This article breaks down how to use the Fundamental Mapper for quantitative value investing, with case studies showing it in action.

Contents

• What is Quantitative Value Investing?

• The March of Quantitative Value Investing

• The Role of the Fundamental Mapper

• Other Forms of Quantitative Value Investing

• Famous Quantitative Value Investors

• Research Insights on Quantitative Value Investing

• Short-Term vs. Long-Term Quantitative Value Investing

• Choosing the Right Tool for Quantitative Value Investing

• Fundamental Mapper in Action

• Final Thoughts

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What is Quantitative Value Investing?

Traditional value investing means digging deep into financial statements. Quantitative value investing takes a different path. It uses data, formulas, and systems to screen, evaluate, and rank stocks. No emotions. Just numbers.

Key Principles of Quantitative Value Investing.

• Data-driven analysis. Eliminates emotional biases in investment decisions.

• Systematic stock selection. Uses objective screening criteria to find undervalued opportunities.

• Risk-adjusted approach. Evaluates the margin of safety and downside protection.

• Efficiency. Saves time by quickly identifying high-potential stocks.

Quantitative value investing is on the rise. Once a niche within value investing, it is gaining ground fast. Here are why:

• Growing interest. Over the past decade, more investors are talking about it. Books, articles, and online discussions show a rising demand for systematic strategies.

• Smarter tools. Investment firms now use machine learning and AI to refine stock selection. These technologies process massive data sets, improving accuracy and results.

• Proven performance. Studies show that well-built quantitative value portfolios often beat the market over time.

• Stronger in tough times. These strategies adjust dynamically, helping investors stay steady during market swings.

There are however challenges to be considered when looking at quantitative value investing:

• Data quality and availability. Success depends on clean, accurate financial data. If the data is flawed, so is the strategy. Investors must ensure their numbers are complete, reliable, and up to date.

• Overfitting. A model that shines in back tests may crumble in the real world. Too much fine-tuning can make a strategy fit past data perfectly at the cost of future performance. Investors must guard against this trap.

• Factor selection and weighting. The right factors matter. The wrong mix skews results. Investors must pick wisely and balance them well.

• Market regime changes. No strategy works in all markets. What thrives in one era may fail in another. Investors must adapt, or the market will force them to.

Quantitative value investing can work, but only if done right.

The March of Quantitative Value Investing

Benjamin Graham started it. A man with a sharp mind and a distrust of market folly. In the 1930s, he gave the world “Security Analysis” and “The Intelligent Investor”. He showed that stocks were not stories. They were numbers, earnings and assets. A margin of safety between price and worth.

Then came the mathematicians.

• Markowitz, in the 1950s, put numbers to risk. He called it Modern Portfolio Theory. Diversify, he said. Spread your bets. Some listened. Some scoffed.

• In the 1960s, William Sharpe gave us CAPM. A neat formula that told you what a stock should return for the risk you took. Simple. Clean. Maybe too simple.

Then the machines arrived.

• By the 1980s, computers crunched numbers faster than any analyst. Investors fed them data. Stocks got screened. Patterns emerged. Renaissance Technologies and AQR built their empires on algorithms. They did not listen to stories. Just numbers.

• The 1990s saw a new wave. Fama and French cracked the code with their three-factor model - value, size, and market risk. The proof was in the data. Cheap stocks beat expensive ones. Small companies outperformed giants.

Then, the machines got smarter.

• By the 2000s, hedge funds and quants had new weapons - machine learning, big data, neural networks. Models no longer just screened stocks; they predicted them.

• Now, in the 2020s, AI and alternative data dig deeper. They scrape financial reports, track credit card swipes, even count cars in parking lots. Every edge matters. But the truth stays the same - cheap stocks, bought right, still win.

Some say value investing is dead. The data disagrees. 

As quantitative investing evolved, investors needed tools to simplify stock selection while maintaining rigor. The Fundamental Mapper does just that.

The Role of the Fundamental Mapper

Unlike traditional value screens that focus on single metrics, the Fundamental Mapper visually categorizes stocks based on 2 dimensions, making it easier to spot true bargains.

• Business Performance (Good/Poor), measured by key parameters such as profitability, growth, Reinvestment, and business risk.

• Investment Risk (High/Low), determined by comparing market price relative to intrinsic value. 

This results in the following four quadrants:

• Goldmine (High performance, Low risk) → Best value opportunities.

• Gem (High performance, High risk) → Quality companies at fair prices.

• Turnaround (Low performance, Low risk) → Potential recovery plays.

• Quicksand (Low performance, High risk) → Avoid these stocks.

For details refer to “Unlocking the Power of the Fundamental Mapper”

Other Forms of Quantitative Value Investing

While the Fundamental Mapper offers a unique quadrant-based approach to identifying undervalued stocks, quantitative value investing encompasses several methodologies, each with its own strengths and historical performance studies.

Factor-Based Investing (Multi-Factor Models)

Quantitative value investing often integrates multi-factor models, blending value, quality, momentum, and low-volatility factors for enhanced risk-adjusted returns. Key value factors include:

• Price-to-Earnings (P/E) Ratio – Identifying stocks with low P/E relative to historical norms.

• Price-to-Book (P/B) Ratio – Finding companies trading below their book value.

• Earnings Yield (E/P Ratio) – The inverse of P/E, often combined with quality filters.

• Enterprise Value-to-EBITDA (EV/EBITDA) – Adjusts for capital structure differences.

Efficacy:

• Fama and French’s Three-Factor Model (1992) established that value stocks tend to outperform growth stocks over extended periods.

• Novy-Marx (2013) suggested incorporating profitability metrics improves returns.

• Asness, Frazzini & Pedersen (2019) demonstrated that combining value with momentum enhances risk-adjusted returns.

Machine Learning & AI-Driven Value Investing

Some investors employ machine learning to refine quantitative value strategies, leveraging big data analytics to improve screening methods. AI-driven approaches analyse:

• Text-based sentiment analysis (Earnings call transcripts, news sentiment).

• Alternative data sources (Satellite imagery, credit card transactions, web traffic).

• Financial statement anomalies (Fraud detection, accruals quality, earnings persistence).

Efficacy:

• Studies indicate that AI-based value strategies improve screening efficiency, but traditional value principles remain essential.

• AI optimizes factor selection and portfolio rebalancing rather than replacing human-driven value investing.

Deep Value & Net-Net Investing (Graham-Style Quantitative Value)

Inspired by Benjamin Graham, net-net investing seeks stocks trading below their Net Current Asset Value (NCAV), calculated as:

NCAV = (Current Assets – Total Liabilities) / Number of Shares

This extreme form of deep value investing identifies severely mispriced stocks, often in distressed situations.

Efficacy:

• Henry Oppenheimer (1986) and James Montier (2010) confirm that net-net stocks outperform market averages, though liquidity risk and value traps are key concerns.

• Tobias Carlisle’s "Deep Value" (2014) shows that stocks with the lowest price-to-book ratios consistently outperform but require patience.

Quantitative Momentum-Adjusted Value Investing

Some strategies integrate value with momentum indicators, ensuring that stocks are cheap but not falling knives. These models use:

• Relative Strength (12-month momentum) – Helps avoid value traps.

• Earnings Revisions – Ensures earnings stability in value stocks.

• 50-day & 200-day Moving Averages – Screens out structurally declining stocks.

Efficacy:

• Cliff Asness (AQR) found that momentum-boosted value investing improves drawdown resilience.

• Jegadeesh and Titman (1993) established that momentum strategies enhance risk-adjusted performance when paired with deep value.

Famous Quantitative Value Investors

Here are five key figures in quantitative value investing:

Joel Greenblatt. His "Magic Formula" ranks stocks by earnings yield and return on capital. Simple, systematic, and effective. It is one of the most well-known quantitative strategies.

Cliff Asness. AQR Capital’s founder mixes value, momentum, and other factors. His research shows that combining value and momentum leads to better risk-adjusted returns.

Tobias Carlisle. A deep-value investor, he hunts for stocks trading at extreme discounts. His "Acquirer’s Multiple" method proves that buying the cheapest companies can yield big gains.

Robert Novy-Marx. He introduced the profitability factor. His work shows that cheap, highly profitable companies outperform traditional value stocks.

James O’Shaughnessy. A systematic investing pioneer. His book "What Works on Wall Street" proves that blending value and momentum, backed by decades of data, leads to stronger returns.

Research Insights on Quantitative Value Investing

Recent research backs quantitative value investing. Data-driven models sharpen strategies and improve returns.

Investing in Value Without Betting Against Growth

A study by Northern Trust (2023) offers a fresh take on value investing. It groups stocks by growth traits using machine learning. The goal? Capture the value’s upside while avoiding its cycles. This aligns with the Fundamental Mapper, which refines value investing with dynamic, data-driven insights.

Predictive Modelling for Smarter Stock Selection

A study (arXiv:1709.03226) tests predictive models to enhance value investing. Adjusting financial metrics in real-time improves stock selection. Back-tests show better performance in spotting bargains. The Fundamental Mapper takes a similar approach—systematically evaluating stocks based on business strength and risk.

Better Factor Investing with AI Forecasting

Another study (arXiv:1711.04837) explores how deep learning predicts company fundamentals. Smarter forecasts mean sharper stock picks. While AI adds power, fundamental principles still matter. The Fundamental Mapper blends structured analysis with systematic risk adjustment, making it a strong complement to AI-driven investing.

These studies prove one thing - systematic models work. They cut bias, enhance strategy, and make value investing even stronger.

Short-Term vs. Long-Term Quantitative Value Investing

Quantitative value investing is about numbers, not emotions. It strips out the noise and focuses on fundamentals. But there is a question every investor must answer: Is this a short-term game or a long-term one?

Some play it short. They build models that churn stocks every quarter, betting on quick mean reversion. They buy the cheap and sell at a modest gain. If it works, they do it again. The key is discipline. No deep dives, no attachment. Just data and execution.

But the real power lies in the long game.

Markets misprice stocks, but corrections take time. True value investing, even when done with a quantitative lens, works best over years, not months. The longer you hold, the more business fundamentals take control. Stocks that are undervalued today may take years to reflect their true worth. That’s where compounding works its magic.

The Fundamental Mapper: A Long-Term Tool

The Fundamental Mapper is built for long-term investors. It doesn’t chase price swings. It maps a company’s business performance against its margin of safety. The past six years of data shape its insights. It updates business fundamentals quarterly - not daily, not weekly. 

It tells you where a stock stands, not where it will go tomorrow. If a company sits in the Goldmine quadrant, it means strong fundamentals and a wide discount on intrinsic value. But revaluation takes time. Gems are solid businesses trading at fair prices. Turnarounds have potential but require patience. Quicksand? Avoid them.

This framework demands conviction. Buy the right stocks and hold. Let the business work. Let the market catch up. That’s how long-term value investors win.

Why Long-Term Wins

In the short term, sentiment rules. Fear and greed push prices up and down. Earnings reports create volatility. A stock may sit undervalued for years before the market wakes up.

The Fundamental Mapper thrives in this environment. It does not predict short-term moves. It prepares you for the long haul. It shows where real value lies, so you can invest with confidence.

Buffett said it best: “The stock market is designed to transfer money from the Active to the Patient.” The Fundamental Mapper is for the patient. If you want quick flips, look elsewhere. If you want lasting wealth, trust the process, hold tight, and let time do the work.

Choosing the Right Tool for Quantitative Value Investing

While there are several quantitative value investing tools or apps available, not all are the same. Some focus on deep value - hunting for the cheapest stocks. Others combine value with momentum to avoid falling knives. Some rely on AI, crunching massive datasets in seconds.

The Fundamental Mapper stands apart. It does not just rank stocks. It maps them. It shows whether a company is strong or weak, risky or safe. A single glance tells you where to focus.

Below is a breakdown of the some of the quantitative value investing tools. Each has its strengths. Choose the one that fits your style.

Table 1: Quantitative Value Investing Tool/App

Fundamental Mapper in Action

In quantitative value investing, the Fundamental Mapper is a powerful tool. It helps visualize stocks based on performance and risk.

This section dives into real case studies. Each one shows how the Fundamental Mapper spots undervalued stocks. These examples reveal the unique dynamics of different companies and prove how this framework works in practice.

Case Study 1: MyEG – Goldmine or a Missed Opportunity?

MyEG Services Berhad (MYEG) is a leading digital services provider in Malaysia, specializing in e-government and commercial services. The company acts as a digital bridge between the government, businesses, and consumers by offering electronic services that enhance convenience, efficiency, and accessibility.

Over the past five years, MyEG has evolved from a government service provider into a regional tech-driven digital solutions company, diversifying revenue beyond government contracts.

2019-2021: Foundation & Pandemic Boost

MyEG built its business around e-government services like road tax renewals and summons payments. The COVID-19 pandemic accelerated growth, as MyEG adapted by offering health screening and quarantine solutions.

2022: A Strategic Shift

To reduce reliance on government contracts, MyEG expanded into commercial services like car insurance, financing, and online marketplaces. These higher-margin businesses helped sustain profits despite the decline in pandemic-related revenue.

2023-2024: The Game Changer

MyEG entered the blockchain and Web3 space, launching Zetrix, a blockchain platform enabling cross-border trade and digital identity verification. This unlocked new revenue streams and expanded MyEG’s footprint into China and Southeast Asia.

Stock Price vs. Business Growth: A Gap?

The company’s revenue and earnings have grown steadily, but stock price volatility over the past three years raises questions.

Chart 1: MyEG Financial & Stock Performance Snapshot

As seen in the Fundamental Mapper, MyEG is borderline between the Gem and Goldmine quadrants. If business performance continues to improve while the stock price remains unchanged, it could shift into the Goldmine quadrant, signaling better investment potential.

Will the market eventually catch up with MyEG’s transformation?

Case Study 2: Press Metal Aluminum – is the market wrong?

Press Metal Aluminium Holdings Berhad (Press Metal) is a leading integrated aluminium producer in Southeast Asia. It has a fully integrated business model covering bauxite mining, alumina refining, smelting, and downstream manufacturing. Its low-carbon aluminium and strong global distribution network position it as a key player in the sustainable materials market.

Over the past five years, the company has strengthened its market position by improving cost efficiencies, expanding into new high-growth markets, and enhancing its sustainability focus. 

These strategic initiatives have contributed to its improving financial performance, as illustrated in the two middle charts. However, its performance trends also coincided with the uptrend in the aluminium price cycle. 

Chart 2: Press Metal Financial & Stock Performance Snapshot

As shown in the leftmost chart, Press Metal’s stock price is currently lower than its past three-year high. At the same time, it is positioned within the Gem quadrant on the Fundamental Mapper (rightmost chart), indicating strong business fundamentals.

This positioning suggests that the market may be anticipating a downtrend in aluminium prices, which could impact future earnings. Is the market wrong?

• If the market is right, the company's stock would be overvalued based on historical performance.

• If the market is wrong and aluminium prices remain strong companies like Press Metal may continue to thrive.

This raises an important question: Is the company’s growth primarily driven by operational improvements, or is it largely influenced by rising aluminium prices? 

Case Study 3: Gadang - Stable, Undervalued, and Poised for Growth?

Gadang Holdings Berhad is a diversified construction, property development, and utilities company based in Malaysia. The company operates in multiple sectors, including engineering & construction, property development, utilities, and mechanical & electrical services.

The company is expanding regionally, diversifying into green energy, and positioning itself for long-term infrastructure growth in Malaysia and Indonesia.

The fundamentals suggest steady growth potential, especially with increasing contributions from renewable energy projects. You can see this from the P&L charts showing the past 5 quarters and 5 years' performance. 

Chart 3: Gadang Financial & Stock Performance Snapshot

The current market price suggests Gadang is undervalued relative to its book value and long-term growth potential. However, the thin margins and cyclical exposure may temper the immediate upside. 

Gadang position on the border of the Goldmine and Turnaround quadrants in the Fundamental Mapper (leftmost chart) is in line with the fundamentals and investment risk.

A fundamental investor should watch for a combination of operational improvements (higher margins, utility growth) and external drivers (infrastructure spending) as catalysts for re-rating eg.

• The expansion of renewable energy initiatives.

• Winning large, high-margin contracts.

• Increasing the dividend or enhancing shareholder returns.

Case Study 4: Systec – has the market given up on its growth?

Systech Bhd is a technology solutions provider listed on the ACE Market of Bursa Malaysia. Over the past 5 years, Systech shifted from being primarily a provider of software and e-business solutions to focusing on AI, IoT, digital transformation, and cybersecurity. It divested its loss-making e-business solutions and acquired capabilities in digital transformation and AI.

These strategic changes reflect an adaptation to evolving market demands and a drive toward long-term growth. These acquisitions, together with its focus on high-growth areas like IoT, cybersecurity, and operational efficiencies, have helped to drive revenue growth in recent quarters as can be seen in the chart. 

The strange thing is that the market price has come down since Sep 2023 as shown below. Is the market suggesting that these growths cannot be sustained since Systec falls into the high-investment risk, poor business fundamental quadrant on the Fundament Mapper (rightmost chart)?

Chart 4: Systec Financial & Stock Performance Snapshot

Apart from continued revenue and earnings growth, look out for the following in the next few quarters to asses that growth is sustainable.

• A diversified customer base.

• Product innovation.

• Organic growth.

Final Thoughts

Quantitative value investing remains a specialized area within the broader value investing framework. The integration of data-driven techniques, combined with evidence of strong performance, suggests that this approach is becoming increasingly mainstream among investors seeking systematic methods to identify undervalued assets.

Empirical research supports the efficacy of quantitative value investing, but execution is key:

• Factor-based models offer risk-adjusted returns over long periods.

• AI & machine learning refine screening but do not replace core value principles.

• Deep value & net-net investing yields superior returns but demands patience.

• Momentum-enhanced value strategies provide downside protection.

By understanding multiple quantitative value approaches, investors can refine their strategy for better long-term outperformance.

Why the Fundamental Mapper approach works

By integrating data-driven systematic risk assessment, and quadrant-based stock mapping, the Fundamental Mapper offers a powerful way to identify mispriced opportunities while avoiding potential pitfalls. 

• Removes emotional bias. Numbers do not lie, eliminating irrational decision-making.

• Enhances efficiency. Quickly filters through hundreds of stocks to identify top prospects.

• Reduces risk. The built-in margin of safety ensures downside protection.

• Improves consistency. A structured approach leads to repeatable success.

By adopting quantitative value investing, investors can make smarter, faster, and more profitable decisions in an increasingly complex market.

Are you ready to start applying quantitative value investing? Explore the Fundamental Mapper to find undervalued stocks today!

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If the above article was useful, you can find more insights on how to make money in my e-book. The e-book is now available from Amazon, Kobo and Google Play.

PS: If you are in Malaysia or Singapore, the e-book can only be download from Kobo and Google Play. 

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