The Acquirer's Multiple Strategy
What Is It?
The Acquirer's Multiple is a proven contrarian investment strategy that's particularly well-suited to long-term investors. By taking an organized, disciplined, and unemotional approach to investing, the method helps identify deeply undervalued stocks that can be held for one year to see a regression to the mean.
In his book, "The Acquirer's Multiple: How the Billionaire Contrarians of Deep Value Beat the Market," Tobias Carlisle describes this powerful investment method. With a track record of success, the strategy would have delivered an average annual return of 18.6% between 1973 and 2017, compared to just 10.2% per year for the S&P500.Check out the book to learn more.
In Practice
- Go to The Acquirer's Multiple Investing website
- Create an account
- Go to the Stock Screener* (only the Large Cap 1000 Screener is free)
- Compose your portfolio
- Buy X number of stocks with the lowest Acquirer's Multiple scores every Y months.
- E.g., Cumulus Capital Management buys three stocks with equal-dollar amounts every single month.
- E.g., You can also buy 20 stocks every year.
- Hold these stocks for one year, no matter what.
- Do not panic sell, do not take premature profits.
- Only sell after one year if the stock is not on the list anymore.
- Depending on the Capital Gains laws in your country and for tax purposes, keep winners for more than one year, and sell losers before the one-year mark.
- Repeat the previous steps every Y months according to your strategy.
* You might want to filter out Companies you do not want to invest in for personal reasons.
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The Acquirer's Multiple formula
The Acquirer's Multiple Score is calculated based on the ratio of
- Enterprise Value
- Operating Earnings
The Enterprise Value is equal to
- Market capitalization
- + Debt
- - Cash
The Operating Earnings are equal to
- Revenue
- - the cost of goods sold
- - selling, general & admin costs
- - depreciation & amortization
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