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Ever since I read *What Works on Wall Street* by James O’Shaughnessy, I have been buying stocks mostly based on the Value Composite Two Factor (VC2). Basically, it ranks stocks using:
* Price-to-book
* Price-to-earnings
* Price-to-sales
* EBITDA/EV
* Price-to-cash flow
* Buyback yield
If you had followed this strategy between January 1964 and the end of 2009, you would have achieved a 19% arithmetic average return and a 22.74% median return for stocks in the first decile (the best 10% ranked) of VC2.
Usually, when I apply this approach, very “boring” companies show up. They barely have growth and tend to be extremely conservative. My wife hated it, but for example private prisons like GEO appeared in the screen, which later resulted in a huge return. There are other companies I still own because of VC2, like one that literally “produces” chickens. Very boring.
It is extremely rare for software companies to appear in this screen. It is also very rare even if I loosen the filter to decile 3 (best 30%), which still performs very well historically. When combined with additional criteria like growth, software or tech stocks almost never show up. And if they do, something shady often happened in the past, and you cannot invest because of red flags.
During the last three years, I opened and already sold two positions based on VC2 that were software companies:
* **OPFI**: Provides subprime credit to people who cannot get credit elsewhere. They managed this successfully using AI. I bought around USD 3 and exited around USD 13.
* **ACP.WA**: A Polish software company with good growth. Bought three years ago and exited a couple of days ago with roughly +200%.
Also an honorable mention:
* **IZMO**, an Indian company, showed up three years ago at around 70 INR. Unfortunately, I could not buy it at either of my two brokers. It went up to 1,374 INR…
At the beginning of last year, I encountered **GFT** from Germany, a global digital transformation company with a strong focus on responsible AI. GFT specializes in data- and AI-driven modernization of technology architectures and the development of next-generation core systems, particularly for industries such as banking, insurance, manufacturing, and robotics. With deep industry expertise, a strong partner ecosystem, and more than 12,000 technology experts across over 20 countries, GFT positions itself as a trusted partner for sustainable, high-performance, and cost-efficient digital innovation.
GFT has solid growth:
Annual sales growth of 14.3% and EBITDA growth of 12.8% over the last five years. Only last year was a bit rougher, with sales barely growing (0.3%).
Interestingly, GFT was also ranked very well within VC2. Since I started holding the stock, it has risen noticeably (about 14%). Within my current VC2 screen, it now ranks in the middle of the third decile.
The management strikes me as experienced and competent. I believe they will achieve their strategic goals and truly become an “Artificial Intelligence Digital Transformation Challenger.”
I believe the combination of:
* moderate but sustained historical growth
* above-average VC2 valuation
* strong management
* diversified, real-life use cases of AI
is currently unique within the AI sector.
Accordingly, with over 5,000 shares, GFT is currently my largest position. I also hold call options.
The bear case, of course, is that GFT could stop growing and stagnate. Even then, I believe it is fairly valued even without growth, and the downside seems limited. Additionally, an “AI bubble” could burst and drag GFT down with it.
All in all, however, I believe the risk–reward profile looks very attractive.
**This is not financial advice.** I am a private investor and obviously do not have the data, resources, or information set of a professional investor. Everyone should build their own view based on the available numbers, valuations, and their personal risk tolerance.