Avoiding Financially Distressed Companies Using a Simple Value Investing Heuristic

Otuteye, E., & Siddiquee, M. (2015). Avoiding Financially Distressed Companies Using a Value Investing Heuristic. Journal of Investing, 24(3), pp. 73-99

Posted: 30 Mar 2014 Last revised: 17 Oct 2017

See all articles by Eben Otuteye

Eben Otuteye

Faculty of Management, University of New Brunswick

Mohammad Siddiquee

Department of Business Administration and Tourism and Hospitality Management, Mount Saint Vincent University

Date Written: March 28, 2014

Abstract

In a previous presentation we showed how it is possible to use a set of financial ratios to create a value portfolio that is capable of outperforming the aggregate market. We labeled that method the O-S heuristic approach to value investing. This paper presents evidence that not only is the O-S heuristic capable of selecting desirable assets for inclusion in the portfolio, it also avoids 100% of companies that either become insolvent or experience some form of financial distress.

Keywords: Value Investing, Value Traps, Margin of Safety, Bankruptcy

Suggested Citation

Otuteye, Eben and Siddiquee, Mohammad, Avoiding Financially Distressed Companies Using a Simple Value Investing Heuristic (March 28, 2014). Otuteye, E., & Siddiquee, M. (2015). Avoiding Financially Distressed Companies Using a Value Investing Heuristic. Journal of Investing, 24(3), pp. 73-99. Available at SSRN: https://ssrn.com/abstract=2417492 or http://dx.doi.org/10.2139/ssrn.2417492

Eben Otuteye

Faculty of Management, University of New Brunswick ( email )

Fredericton, New Brunswick E3B5A3
Canada

Mohammad Siddiquee (Contact Author)

Department of Business Administration and Tourism and Hospitality Management, Mount Saint Vincent University ( email )

166 Bedford Highway
Halifax, Nova Scotia B3M 2J6
Canada
902-457-6931 (Phone)
902-445-2582 (Fax)

HOME PAGE: http://www.msvu.ca

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