About The Alpha Engineer
From Value Investor to Quant Engineer: Finding Alpha Where Others Don't Look
Hello, I'm Peter, the founder of The Alpha Engineer. For over 20 years, I've been applying my analytical engineering mindset to the world of investing. As a former tech entrepreneur who built a pioneering firm in drone technology, I've now turned my problem-solving skills to a different challenge: how can individual investors consistently outperform the market?
The Problem: Limited Options for DIY Investors
If you're managing your family funds or retirement portfolio, you're facing a challenging environment:
Passive index investing worked well for American indices in recent decades, but as Japan in the 90s and Europe in the 2010s demonstrated, lost decades are not uncommon. The current macro environment suggests the past may not resemble the future.
Active fund managers rarely beat their benchmarks consistently, as most end up tracking indices to avoid career risk.
DIY stock picking requires significant knowledge, experience, and time---especially if you're focusing on the same mid and large-cap stocks that everyone else (including the "gurus") is analyzing.
Most DIY investors end up focusing on dividend investing or "moat" stocks---the same pool of well-known companies that professional investors target. While this approach may be prudent, it inherently limits your returns.
Even Warren Buffett has suggested that if he were managing a smaller portfolio, he could achieve 50% annual returns.
My Journey: Two Decades of Investment Discovery
My investment journey has taken many turns. When I began more than 20 years ago, I was like many novice investors---chasing exciting growth stories without a systematic approach. I once bought Netflix based on a newsletter recommendation, only to sell it shortly after. Had I held onto it, that single position would have returned 250x my investment.
In 2012, after selling my drone business, I had significant funds to manage for my family. I doubled down on value investing---studying guru recommendations, analyzing 10-Ks, subscribing to ValueLine, and testing mechanical approaches like Greenblatt's "Magic Formula."
The results were reasonable but underwhelming, as I trailed the US indices by a wide margin.
Everything changed in 2016 when I finally understood that micro- and small-caps offer the biggest potential returns for individual investors like myself. The inefficient part of the market is the long tail of thousands of stocks that large investors (and most investors in general) would never touch.
I began with net-net investing, a method developed by Benjamin Graham that looks for companies selling for a fraction of their net current asset value. While applying this in Japan, my portfolio gained +130% (in EUR) in just two years, with three outliers accounting for half the gains: Sec Carbon (541%), Leader Electronics (334%), and Yotai Refractories (173%).
The next two years brought volatility as the global economy slowed and the pandemic hit, with drop and recovery but it still delivered a compounded annual growth rate (CAGR) over 5 years of almost 25%.
During the pandemic, I had ample time to experiment with backtesting tools and explore academic research. I developed and refined a quantitative model that could identify alpha opportunities in the most inefficient corners of the market. This work gave me the same mental boost I experienced when developing drones---systematically solving complex problems through engineering principles.
The Solution: A Systematic Engineering Approach to Stock Selection
The Alpha Engineer model systematically generates alpha with managed downside risk by leveraging quant research and insights from successful investors, addressing market inefficiencies, and using robust models validated through rigorous backtesting.
My high-level approach focuses on three fundamental drivers of excess returns:
Small Market Cap --- Markets become less efficient as stock size decreases. Smaller stocks receive less analyst coverage, are overlooked by institutions, and often harbor hidden opportunities.
Value --- Stocks with strong valuation metrics provide asymmetric returns, offering more upside potential than downside risk.
Momentum --- Favoring stocks that already demonstrate strength enhances returns, through both fundamental momentum (earnings, sales growth) and technical momentum (price trends).
My model has delivered impressive backtested results based on a disciplined portfolio management approach: maintaining a 50-stock portfolio and only selling when a stock drops out of the top 10% of the overall stock ranking. This systematic approach produced:
48.3% CAGR over 5 years (vs. 16.6% for the S&P 500)
36.2% CAGR over 10 years (vs. 12.9% for the S&P 500)
36.4% CAGR over 15 years (vs. 13.7% for the S&P 500)
Since its completion on November 11, 2024, the CAGR has been 41% (USD) as of February 26, 2025.
One of the drivers of the model's success is its ability to capture multibagger stocks. About 7-8% of the top 100 ranked stocks reach +100% returns on average in less than 1 year and about 15% of the top 100 ranked stocks reach +100% in less than 2 years. The weekly updated Alpha Engineer stock ranking is a treasure trove to find them. I present potential multibaggers in regular deep-dives. Check my process here.
Subscribe and Join The Alpha Engineer Community
Paid Subscription Benefits:
Weekly Stock Rankings --- Access to my proprietary ranking of approximately 3,700 stocks across the US, Europe, UK, and Canada, updated weekly
Buy/Sell Strategy --- Follow my method to build your portfolio
Model Portfolio --- Weekly transactions of the Alpha Engineer 50-stock model portfolio with performance tracking and insights in my own portfolio
Deep-Dive Analysis --- About once a month, detailed research on potential multibagger stocks that have passed my quantitative filters
Direct Access --- Get insights from someone who's spent two decades testing and refining investment strategies with skin in the game
Ready to stop limiting your investment returns and start finding alpha where others aren't looking? Subscribe today and join me in exploring the inefficient corners of the market where individual investors have a distinct advantage over the big funds.
The Alpha Engineer --- Investing with a quantitative edge
Disclaimer: The Alpha Engineer shares insights from sources I believe are reliable, but I can't guarantee their accuracy---data's only as good as its inputs! This content (whether on Substack, via email newsletters, X, or elsewhere) is for informational and educational purposes only---it's not personalized investment advice. I'm not a registered investment advisor, just an engineer crunching numbers for alpha. My opinions are my own and may shift without notice. Investing involves risks, including the chance of losing money. Past performance, whether from back-testing or historical data, does not guarantee future results---outcomes can vary. So, please consult your financial advisor to see if any strategy fits your situation. Full disclosure: I may own positions in the securities I mention, as I actively manage my own portfolio based on these strategies.
