Cycles

In my thirty years of studying the stock market nothing moves stocks more in the short run than what is known as the market cycle. Professional fund managers have a playbook as to the industry sectors to rotate into given the upcoming phase of the business cycle and they move far in advance of the cycle arriving thereby discounting this c

In my thirty years of studying the stock market nothing moves stocks more in the short run than what is known as the market cycle. Professional fund managers have a playbook as to the industry sectors to rotate into given the upcoming phase of the business cycle and they move far in advance of the cycle arriving thereby discounting this change. Within these rotations there are idiosyncratic differences between stocks. These cyclical changes create short term noise that often obfuscates stocks which have been achieving above average long term performance. We look through this short term variability to build a portfolio of long term winners in an equal weighted basket, expecting this performance to continue for many years to come.

It has been said that if markets are the ocean then narratives are its waves. Whether these narratives are positive or negative, impact specific stocks or the industry itself, whether self inflicted or through exogenous shocks, stories impact markets more than any other force in existence. Quant traders and funds have been able to adapt t

It has been said that if markets are the ocean then narratives are its waves. Whether these narratives are positive or negative, impact specific stocks or the industry itself, whether self inflicted or through exogenous shocks, stories impact markets more than any other force in existence. Quant traders and funds have been able to adapt to this news quickly and buy or sell stocks, sectors or etfs accordingly. Although we make no calls either way, these narratives create short term noise that often obfuscates stocks which have been achieving above average long term performance. We look through this short term variability to build a portfolio of long term winners in an equal weighted basket, expecting this performance to continue for many years to come.

Behavioral finance is an area of economic study focused on how psychological influences can affect market outcomes. One of the key aspects of behavioral finance is the influence of psychological biases in trader decisions. These cognitive biases have been part of the human psyche long before any market ever existed. This psychological 'gu

Behavioral finance is an area of economic study focused on how psychological influences can affect market outcomes. One of the key aspects of behavioral finance is the influence of psychological biases in trader decisions. These cognitive biases have been part of the human psyche long before any market ever existed. This psychological 'gunk' clouds the decisions of all fund managers, traders and retail investors alike. These behavioural biases create short term noise which often obfuscates stocks that have been achieving above average long term performance. We look through this short term variability to build a portfolio of long term winners in an equal weighted basket, expecting this performance to continue for many years to come.

Investing as opposed to trading focuses on the qualitative factors of a security whether macro or micro based. Active investing styles include value, growth or quality investing with value investors focused on stocks trading below their intrinsic value, growth investors on the continued growth of sales and earnings per share and quality i

Investing as opposed to trading focuses on the qualitative factors of a security whether macro or micro based. Active investing styles include value, growth or quality investing with value investors focused on stocks trading below their intrinsic value, growth investors on the continued growth of sales and earnings per share and quality investors on companies with above average returns and little or no debt. One of the fastest growing trends in investing over the past twenty years has been passive investing. This involves dollar cost averaging ones portfolio into index funds. Although active investors may also adopt a ‘buy and hold’ approach most investors using this strategy pair it together with passive index funds. Warren Buffett, Peter Lynch, John Templeton, Phillip Fisher and T. Rowe Price were all legendary buy and hold active investors.

Quant funds in my opinion are the only real traders in the market and are really algorithmic electronic trading firms to their core. These trading strategies all use variations of high frequency trading (HFT) programming. While not necessarily traditional HFT, which is to say providing market liquidity at extremely fast speeds to scalp op

Quant funds in my opinion are the only real traders in the market and are really algorithmic electronic trading firms to their core. These trading strategies all use variations of high frequency trading (HFT) programming. While not necessarily traditional HFT, which is to say providing market liquidity at extremely fast speeds to scalp opportunities in bid/ask spreads, these quant funds research massive amounts of historical data and develop algorithms to arbitrage markets that will revert to some derived mean. They deliver above market returns over a longer time horizon but HFT is outside of the scope of our investment capabilities. Famous quant funds include D.E. Shaw, Bridgewater Associates, Citadel Capital, Renaissance Technologies, Point 72, Quantitative Management Associates, Two Sigma, PanAgora, Acadian, Simplex, Capula and AQR Capital.

Market cycles, narratives and psychology impact portfolio manager decisions in a predictive manner. In academic studies and my own personal experience investing is a far more prudent strategy than trading with returns in the long run far surpassing those of the latter. In addition to the fact that investing for the long run outperforms tr

Market cycles, narratives and psychology impact portfolio manager decisions in a predictive manner. In academic studies and my own personal experience investing is a far more prudent strategy than trading with returns in the long run far surpassing those of the latter. In addition to the fact that investing for the long run outperforms trading on most time frames, my personal temperament was also a better match for long term investing. Whether with my own private company or my real estate investing with Greybrook Capital earning money slowly was always my preference. With this predilection for long term investing, each year we focus our screens on finding stocks with above average long term performance. We maintain this portfolio in an equal weighted basket expecting this performance to continue for many years to come.