Everyone’s obsessed with tariffs, next-quarter earnings or the latest Fed rumor. But if you want market-beating results over a multi-year horizon, it’s time to filter out the buzz and focus on a few proven metrics that truly move the needle.

The Illusion of the “Immediate Catalyst”

Amid headlines ranging from tariffs to rate hikes to AI hype, it’s tempting to think big returns come from timing the next week or month. Most real outperformance—especially over 3 to 5 years—comes from companies with specific fundamental and behavioral traits. The data to prove it spans from Eugene Fama and Kenneth French’s classic research to more recent multi-factor modeling by AQR and others.

Here are the factors that keep bubbling to the top. Let’s dive in!

1. Founder-Led & High Insider Ownership 🤝

Skin in the game matters. Founder-CEO companies like Amazon (under Jeff Bezos) and Shopify (with Tobi Lütke) are notorious for beating the market. With large personal stakes, founders focus on long-term value, product innovation, and cultural alignment.

Key Takeaway

• Moderate-to-high insider ownership = management’s interests align with shareholders.

• Beware entrenchment if one person controls everything in a deteriorating firm—then it’s a “value trap,” not a gem.

2. Low Valuation (Value Factor)

“Valuations don’t matter” …until they do. Fama-French found that “value” stocks (cheap P/E, high book-to-market) outperformed “growth” by about 4–5% a year—consistently, around the globe.

ExxonMobil (XOM) in 2020 and Bank of America (BAC) post-2009 soared once overwhelming pessimism subsided.

Key Takeaway

• Paying a lower multiple for real earnings/cash flow tilts the odds in your favor.

• Can be ignored in mania phases, but over 3–5 years, cheap vs. rich often decides who wins.

3. Positive Earnings Surprises (PEAD) ⚡

Companies that keep smashing analyst estimates tend to keep rising—the market underreacts.

• Nvidia (NVDA), circa 2016–2019, posted quarter after quarter of upside, and the stock kept grinding higher.
  

Key Takeaway

• Repeated upside surprises can reshape valuation over multi-year spans.

• Single-quarter pops can fade fast, but consistent beats = sustained rerating.

4. Momentum (Price Above Key MAs) 🚀

Price strength often begets more strength—until it doesn’t. Momentum has delivered some of the highest risk-adjusted returns among factors. A simple rule like “price above the 200-day MA” can keep you in powerful uptrends.

• Tesla (TSLA) from mid-2019 to late-2021 rewarded trend followers who trusted the rocket emoji.

Key Takeaway

• Momentum can crash at inflection points, but while the trend runs, it can be a major alpha booster.

• Great for medium-term holds (6–12 months); keep re-checking to avoid the whiplash.

5. High Profitability (ROA, ROIC, FCF Margins) 💼

Aka “quality.” Novy-Marx found gross profitability had predictive power on par with value. Fama-French added a “robust profitability” factor for a reason.

• Microsoft (MSFT) and Mastercard (MA) show how strong returns on capital drive multi-year compounding.

Key Takeaway

• Seek firms that generate lots of cash from each dollar of assets/investment.

• Sector context matters: a 5% ROA is great for banks but poor for software.
  

6. Big Buybacks (≥4%/yr) 💸

When a company retires stock aggressively, it often beats the market. Home Depot (HD) is a classic case—steady buybacks reduced share count and lifted EPS.

Key Takeaway

• High “shareholder yield” (dividends + buybacks) historically outperforms.

• Check funding sources: buybacks at sky-high valuations or via heavy debt can be a red flag.

7. Strong Customer Satisfaction 🌟

This intangible is often overlooked by quant models, but the data is striking. Companies with top-tier ACSI (American Customer Satisfaction Index) scores massively beat the S&P 500 over 15 years. Loyal customers = pricing power, stable revenue, and fewer negative surprises.

• Costco (COST), Apple (AAPL), and Starbucks (SBUX) famously keep customers happy and shareholders wealthier.
  

Key Takeaway

• Powerful for consumer-facing businesses; less so for commodity or B2B sectors.

• A strong brand can create an earnings “moat” that’s still underpriced by Wall Street.
  

8. Small-Cap Premium 🏹

For nearly a century, small caps have earned about 2% more per year than large caps. Why? Possibly less analyst coverage, liquidity premiums, or faster growth potential. Monster Beverage (MNST) went from micro-cap to mega success.

Key Takeaway

• Small caps can stagnate for years but deliver major alpha off bear market lows.

• Combine with value or profitability filters to avoid the worst “tiny losers.”
  

9. Growth Alone Isn’t Enough ❌

Ultra-high revenue or EPS CAGR doesn’t guarantee future outperformance. If a stock is priced for perfection, any misstep tanks it. Look at Snap (SNAP): user growth initially thrilled the market, but lofty expectations eventually outweighed its actual performance.

Key Takeaway

• “Growth at a reasonable price” works better than unrestrained “glamour” hype.

• Sustained 20–30% growth is rare, and the market often overpays if it spots it early.
  

Putting It All Together

No single factor is a silver bullet. Real outperformance usually stacks multiple edges—say, a small-cap, founder-led business with strong profitability, decent valuation, and consistent upside surprises. Over 3–5 years, that combo can deliver huge alpha.

But remember: factors go in and out of favor. Momentum can blow up at turning points, value can look “dead” in raging tech rallies, and small caps can stall in recessions. Sticking with a factor strategy means enduring the lean periods until the cycle turns back in your favor

Final Thoughts

In a world that hypes the next tariff update or headline inflation print, the biggest opportunities often lie in ignoring the daily noise. The research is clear: fundamentals, proper incentives, and certain factor exposures keep paying off in the 3–5 year window.

Ready to look beyond the headlines? Lean into these data-backed signals, and you’ll have a better shot at beating the market. It’s not magic—just disciplined, long-term investing where the odds are stacked on your side.

Thank you for reading! If you found this insightful, feel free to share or drop a comment. Let’s cut the chatter and aim for real alpha.

References & Further Reading

• Fama & French (Value vs. Growth, Five-Factor Model)

• Novy-Marx on Gross Profitability

• Ball & Brown on Earnings Surprises

• ACSI (American Customer Satisfaction Index) Studies

• Various academic findings on insider ownership, momentum, and small-cap premiums
  

Disclaimer: This post is for informational purposes only and does not constitute investment advice. Always do your own diligence or consult a professional before making financial decisions.