“Writing this blog was a rewarding experience that pushed me to connect with core principles of value investing with how they play out in practice. Brian Chingono's session reinforced that real opportunities often lie where expectations are lowest, and that discipline, humility, and a focus on fundamentals matter more than chasing growth. It's a perspective I'm excited to keep building as I continue my journey in investing.” - Kirtika Chetty
The best investment opportunities rarely make headlines. Brian Chingono, Partner and Director of Quantitative Research at Verdad Advisers, spent an hour with our Value Investing class making exactly that case, not with persuasion, but with evidence. He came to show us where the crowd isn't looking, and why that's precisely where the returns are.
GROWTH DOESN'T PERSIST THE WAY YOU THINK
Brian's core message was this: while the quality of a company's profitability shows real persistence, earnings growth itself does not. It reverts. Think of the companies that dominated the past decade, the ones whose growth felt inevitable. Brian's research shows that those trajectories rarely hold over a three-to-five-year horizon, yet the market keeps pricing them as if they will. That gap between perception and reality is where investors get hurt.
Even more striking was what this means for analyst forecasts. At the median, self-side analysts systematically overshoot. Brian argued they would do better by simply forecasting nominal GDP growth than by running their elaborate models. Analysts do have genuine signal but only at the extremes, sorting the very best growers from the very worst. The problem is that errors are largest exactly where excitement is highest: among high-growth companies already priced to perfection. High-flying firms leave no room for disappointment. And disappointment, the data suggests, tends to follow.
This connects to a broader point our professor Dr. George Athanassakos has made in The Globe and Mail mean reversion is one of the most reliable forces in markets, and today's elevated valuations make it very hard to sustain the returns of the past decade. Brian's research, from the practitioner's side, arrives at the same conclusion.
THE OPPORTUNITY IN BEING IGNORED
Verdad specializes in deep value micro-caps, companies so small that large funds simply cannot own them meaningfully. That neglect is the point. Brian looks for leveraged companies with high free cash flow that are actively paying down debt. The deleveraging creates value, the profitability sustains it, and the low starting price provides the margin of safety. These are businesses that are under promise and overdeliver not because management is exceptional, but because expectations are so low that almost anything beats them.
To understand the opportunity, it helps to think about valuation spreads the gap between how cheaply value stocks trade relative growth stocks. When that gap is wide, value is historically cheap compared to growth, and future returns tends to favour value. Brian noted that the US spread today near some of its widest levels in recent history, comparable to 2005, which preceded a meaningful shift towards value. In other words: growth as rarely been this expensive relative to value. Europe tells a similar story cheaper than it has been historically, and another quiet pocket of opportunity for investors willing to look where the crowd isn't.
HUMILITY AS AN EDGE
About 80% of Verdad's decision-making is algorithmic. The remaining 20 is reserved for qualitative judgement, stripping out one-time distortions, reading capital allocation priorities, assessing the person behind the numbers. Brian was candid about why the split exists: systematic processes remove the psychological biases that quietly destroy returns.
When asked about his biggest personal learning, he didn't reach for a framework. He said: intellectual humility. Knowing what your process can do and being honest about what it can't. That, more than any model, is what keeps you from the mistakes that undo years of good work.
WHAT I'M TAKING AWAY
I walked in expecting a lecture on quant finance. I walked out thinking differently about where to look. Brian didn't dress up his message he simply showed what the data says and let it speak. Profitability persists. Growth doesn't. The stocks nobody wants are often the ones most worth owning. That's not a contrarian slogan. For Brian, it's a research conclusion he has built a firm around and it's one I won't forget.
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Kirtika Chetty
Kirtika is an MBA candidate at the Ivey Business School and a Chartered Accountant with eight years of experience in financial services. She has worked closely with senior leaders on investor relations, business strategy, and financial analysis, building a strong ability to connect numbers with clear compelling narratives. Her interest in value investing is driven by a focus on long-term value creation, business fundamentals, and macroeconomic trends. Kirtika aims to continue her career in financial services. She is also excited to deepen her passion and understanding of value investing by contributing to the Ben Graham Centre for Value Investing.
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The views expressed in these blog posts are the opinions of their authors, and do not necessarily reflect those of the Centre. The intention of this blog is to provide a platform for current, past and upcoming HBA, MBA and Executive program value investing students to discuss value investing and related topics.
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