Screen Test

So-called “quant” fund managers don’t spend their time meeting with company management or dialing in to analysts’ conference calls. Instead, they seek factors that have some ability to predict stock market performance and then invest in companies where those factors are present.

“Macro” data may be studied, too. For example, if the economy appears to be coming out of a recession, quants will look to see how the company did the last time the economy rebounded.

In addition, quant funds develop models that are used to pick stocks. Such models might include:

• Fundamental statistics, such as a company’s financial strength.
• Valuation. Measures here might range from price-to-earnings to the ratio of a stock’s price to cash flow from operations.
• Momentum. Are savvy investors buying or selling? Stocks that are under pressure from short sellers and insiders may be avoided
• Risk factors. Large, established companies tend to be more stable and thus less risky for investors.

This type of model is used by eight Schwab Funds: Schwab Core Equity Fund, Dividend Equity Fund, Hedged Equity Fund, Small-Cap Equity Fund, Communications Focus Fund, Financial Services Focus Fund, Health Care Focus Fund, and Technology Focus Fund.