Minsheng Securities·2025-11-13 10:53Quantitative Models and Construction Methods Models and Construction Methods 1. Model Name: Competitive Advantage Portfolio - Model Construction Idea: This model incorporates the competitive environment and strategic factors of enterprises into the stock selection logic, providing a value quantification perspective different from traditional factor investing[12] - Model Construction Process: The framework identifies four types of industries: "Barrier Shield", "Intense Competition", "Steady Progress", and "Seeking Breakthrough". The strategy focuses on identifying "dominant" companies in the "Barrier Shield" industries and "cooperative win-win" companies in industries without clear leaders. For non-"Barrier Shield" industries, the strategy targets "efficient operation" companies that perform well even in competitive environments[12][13] - Model Evaluation: This model has been effective in identifying companies with significant management competitive advantages and maintaining market leadership positions[12] 2. Model Name: Margin of Safety Portfolio - Model Construction Idea: The core of competitive advantage lies in creating entry barriers for enterprises, ensuring their unique position and sustainable profitability in the market[17] - Model Construction Process: The model calculates the intrinsic value of a company based on its profitability value, selecting the top 50 stocks with the highest margin of safety from a pool of stocks with comprehensive competitive advantages. The portfolio is weighted by dividend yield to maximize the margin of safety[17][19] - Model Evaluation: This model effectively identifies companies with significant intrinsic value gaps, providing a reliable reflection of the actual value of enterprises[17] 3. Model Name: Dividend Low Volatility Adjusted Portfolio - Model Construction Idea: The model aims to avoid the "high dividend trap" by considering the sustainability of company earnings and long-term value, rather than solely chasing high dividend yields[23] - Model Construction Process: The model predicts dividend yields and excludes stocks with extreme price performance or abnormal debt ratios, optimizing the dividend strategy[23] - Model Evaluation: This model effectively balances dividend yield and company stability, avoiding the pitfalls of high dividend traps[23] 4. Model Name: AEG Valuation Potential Portfolio - Model Construction Idea: The model focuses on the abnormal earnings growth (AEG) to determine the value of investments based on expected total returns, including dividend reinvestment[27] - Model Construction Process: The model selects the top 100 stocks using the AEG_EP factor, then narrows down to the top 50 stocks with high dividend reinvestment/P ratios[31] - Model Evaluation: This model targets companies with growth potential not yet fully recognized by the market, providing significant investment opportunities[27][31] 5. Model Name: Cash Cow Portfolio - Model Construction Idea: The model introduces free cash flow (FCF) and cash flow return on investment (CFOR) as key analysis dimensions to evaluate the profitability and cash generation efficiency of enterprises[35] - Model Construction Process: The CFOR system dissects cash flow return rates, revealing how companies convert operating cash flows into net profits, and evaluates the stability of free cash profit ratios and operating asset return rates[35][36] - Model Evaluation: This model provides a comprehensive assessment of a company's operational performance and financial stability[35] 6. Model Name: Distress Reversal Portfolio - Model Construction Idea: The model captures short-term valuation fluctuations to gain from valuation improvements, complementing the long-term effectiveness of prosperity investment[42] - Model Construction Process: The model uses inventory cycles to depict distress reversals, considering accelerated recovery and undervaluation, and constructs a top 50 portfolio based on valuation improvements[42] - Model Evaluation: This model effectively captures valuation-driven returns, providing continuous gains even when prosperity investment strategies fail[42] Model Backtest Results Competitive Advantage Portfolio - Annualized Return: 20.60%[16] - Sharpe Ratio: 0.97[16] - IR: 0.12[16] - Max Drawdown: -19.32%[16] - Calmar Ratio: 1.07[16] Margin of Safety Portfolio - Annualized Return: 23.45%[22] - Sharpe Ratio: 1.17[22] - IR: 0.16[22] - Max Drawdown: -16.89%[22] - Calmar Ratio: 1.39[22] Dividend Low Volatility Adjusted Portfolio - Annualized Return: 17.23%[24] - Sharpe Ratio: 1.01[24] - IR: 0.16[24] - Max Drawdown: -21.61%[24] - Calmar Ratio: 0.80[24] AEG Valuation Potential Portfolio - Annualized Return: 25.13%[33] - Sharpe Ratio: 1.14[33] - IR: 0.15[33] - Max Drawdown: -24.02%[33] - Calmar Ratio: 1.05[33] Cash Cow Portfolio - Annualized Return: 14.11%[40] - Sharpe Ratio: 0.71[40] - IR: 0.10[40] - Max Drawdown: -19.80%[40] - Calmar Ratio: 0.71[40] Distress Reversal Portfolio - Annualized Return: 25.02%[44] - Sharpe Ratio: 1.01[44] - IR: 0.15[44] - Max Drawdown: -33.73%[44] - Calmar Ratio: 0.74[44]