We begin with every stock that trades on a major exchange in developed, emerging, and frontier countries worldwide. After screening, we end up with an investment universe of companies that are seasoned (no IPOs), suitable (no funds or bankruptcies), and liquid (enough to trade). Our strategies draw on all or parts of this universe.
Our research shows multi-factor valuation to be most productive when relative value is assessed on a peer-group basis. We divide our universe by sectors, industry groups, and regions that reflect statistical and fundamental economic relationships among stocks. For global strategies, we consider the global influence on a stock’s valuation to enhance the peer comparison.
Industry Peer Groups
Our U.S. strategies use the GICS-based, AJO-customized industry groups below,
while our non-U.S. strategies use standard GICS industry groups.
|GICS Sectors||AJO Industry Groups|
|Communication services||telecommunication services, media, entertainment|
|Consumer discretionary||specialty retail, consumer services, internet/catalog retail, motor vehicles, consumer durables/apparel, household durables|
|Consumer staples||food/beverage/tobacco, household/personal products, food/staples retailing|
|Energy||drilling, exploration/production, equipment/services, consumable fuels|
|Financials||diversified financials, insurance, life insurance, banks|
|Health care||pharmaceuticals, biopharmaceuticals, biotechnology, health care equipment/services, managed health care/facilities|
|Industrials||aerospace construction/conglomerates, machinery, transportation, commercial/professional services|
|Information technology||hardware/electronics, software, IT services, semiconductors|
|Materials||gold/precious metals, other materials|
|Real estate||REITs, real estate management/development|
Region & Country Peer Groups
Our non-U.S. strategies are further divided by region and country.
We use peer groups to eliminate structural bias across groups; however, for certain factors that measure change, differences between groups are episodic, indicating opportunities we might exploit.