The One Factor That Explains the Struggles of Value, International and Small-Cap Stocks | Kai Wu

In this episode of Excess Returns, we sit down with Kai Wu, founder of Sparkline Capital, for a fascinating discussion about intangible value investing and its global applications. Kai shares his expertise on using machine learning and natural language processing to identify companies rich in intellectual property, brand equity, human capital, and network effects. We explore why U.S. firms have historically outperformed many international counterparts, with Kai explaining how the gap in intangible asset investment has been a crucial factor. We discuss: How traditional value metrics miss important aspects of modern company value The four pillars of intangible value: IP, brand equity, human capital, and network effects Why international markets have lagged the U.S. and how intangible value can help close this gap The role of AI and machine learning in modern investment analysis A surprising analysis of global patent leadership This episode offers valuable insights for investors interested in both value investing and international diversification. Whether you're a quantitative investor or just interested in understanding how modern companies create value, you'll find plenty to think about in this discussion. 00:00 - Introduction and overview of intangible value investing 00:33 - "Value investing cannot be dead" - Key insights on value investing 02:03 - Why traditional value metrics have struggled 04:12 - The four pillars of intangible value 07:45 - Using AI and machine learning to measure intangibles 13:22 - How patents reveal global innovation trends 18:45 - Converting intangible metrics into a portfolio strategy 25:06 - The Amazon example: Why traditional metrics missed the story 29:33 - International stocks vs US stocks performance gap 34:15 - Why US companies lead in intangible investment 39:42 - "It's not about US vs International - It's Tangible vs Intangible" 44:28 - Country and sector analysis of intangible value 50:15 - Discussion of new international intangible value ETF 52:40 - The future of AI in investment management 56:33 - Closing thoughts on AI's impact on financial jobs 59:45 - Outro and where to follow SEE LATEST EPISODES https://www.excessreturnspod.com FIND OUT MORE ABOUT VALIDEA https://www.validea.com FIND OUT MORE ABOUT VALIDEA CAPITAL https://www.valideacapital.com FOLLOW JACK Twitter: https://twitter.com/practicalquant LinkedIn: https://www.linkedin.com/in/jack-forehand-8015094 FOLLOW JUSTIN Twitter: https://twitter.com/jjcarbonneau LinkedIn: https://www.linkedin.com/in/jcarbonneau