James O’Shaughnessy is one of very few investors who can truly lay claim to having changed the way people approach the stock market. He’s also one of the nicest and most engaging people you could hope to meet.
O’Shaughnessy has spent more than 30 years researching equity market returns. His work has brought to the fore the power of what he calls ‘fundamental quant’. His groundbreaking studies became a relentless pursuit of the factors that are most commonly associated with outperformance. And from that he built a fund management business with nearly $7 billion under management.
For most professional money managers, those achievements would probably be enough. But O’Shaughnessy is remarkably altruistic. Despite lucrative offers to keep his research private, he presented it to the world.
As the author of four books, it was the second - What Works on Wall Street - that transformed his career and very likely the fortunes of many others. In four editions published between 1997 and 2012, he set out his findings on how elements of value, quality and momentum combine to work in investing.
What set him apart was a willingness to follow the data, even if it meant tearing up previous conclusions. What he was left with was a set of strategies that he could stick with in good times and bad.
O’Shaughnessy’s benevolence - his readiness to share his knowledge - is in his genes. His grandfather built what was once one of the world’s largest privately-owned oil company before giving away 95 percent of his fortune during his lifetime. In fact it was the family debates on how the enduring foundation should be invested that first got the 17-year-old O’Shaughnessy into studying markets.
Back then, all he had was a Value Line subscription, a large paper spreadsheet and and a book on the Dow Jones Industrial Average. Some years later - after finishing college and getting married - he returned to those studies. With the help of computers and the advent of Morningstar, he started taking much deeper dives into the market.
Jim told me this story when I met him at a suitably exclusive, yet surprising relaxed and rules-free club in New York City. Having recently passed the leading role at O’Shaughnessy Asset Management to his son Patrick, I got the impression that he was very much enjoying a slightly more relaxed life…
Ben: Jim, what…
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