Crowding: Risk and Opportunity

We established a systematic approach to analyzing the high conviction ideas of money managers through their 13F filings. We used this approach to inform recommendations about position sizing, and sometimes whether we would even buy or short a stock. While 13F filing data are lagged, and we do not know any manager’s real exposure as we are not assessing the options market or any short positions, we found it instructive to define a proprietary universe of fundamental managers, define high conviction, and use our quantitative models to improve our ability to find superior and inferior groups of equities.

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Focus On Dividends

We took a detailed look at dividend-related strategies given the massive shift in the perception about the path of interest rates. This report is part of our ongoing research on capital use and its consequences.

We believe there is above normal potential for dividends to matter going forward given the pending Fed lift off and historically wide valuation dispersion among the dividend yielders. Our quantitative models that specifically focus on dividend-yielding stocks are effective for picking winners / losers among this cohort.

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Time To Buy Growth

We discuss the recent QQQ and SPX sell-off, merited in part by a change in macro conditions and perceptions about growth. Financial conditions have materially tightened and are now the least “loose” since early in 2021. The 2022 US GDP forecast is about 25bps lower from its peak late in 2021, having slowly declined, without a single uptick.

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It’s Not the Change in Rates, It’s The Perception About the Change in Rates

We did some new work on interest rates that go beyond the basic measurement of the relationships between historical stock performance and the 10-year yield that we initially did over a decade ago.

We have long thought that what matters to investing is changes to perceptions about growth and changes to perceptions about rates. In that light, we analyzed the Fed Funds future curves over multiple horizons (6,12,24, etc. months) minus the Fed fund rate as a proxy for changes in perception of interest rates vs. subsequent stock return

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How Are We Going To Make Money in 2022?

Our 2022 outlook is focused on long and short stock ideas followed by some analysis on changes in multiples and market dynamics. Though we do not do deep fundamental analysis as a firm, these stock ideas are ones that embody the themes of our research. They are meant to stimulate thought and idea generation for our clients. Please do not hesitate to contact us to discuss our work.

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What Really Happened in Q4 and Q1 Investment Advice​

We provide a detailed quarterly summary to help investors prepare for their quarterly investor communications as well as identify emerging risk management concerns. We break our quarterly analysis into several areas of interest: performance facts, factor efficacy, the opportunity set, corporate profitability, macro / economic developments, and data from 13F filings and insider transactions.

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Opportunities in the Healthcare Sector

We have seen a massive deviation in healthcare sector stock performance in 2021. Given the idiosyncratic nature of the sector, meaningful performance deviation is normal. However, this magnitude of performance deviation catalyzed us to look for valuation / growth disconnects and search for opportunities.

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Less Opinion, More Analysis: A Systematic Assessment of 150 Macro Variables

The recent market volatility started as a result of opinions over a perceived Fed pivot and the new COVID variant. Corporate commentary generally indicates a slow path toward the resolution of the logistics, transportation, and supply-chain bottlenecks induced by COVID, with many suggesting normalization is expected in the second half of 2022, albeit with some variability depending on product. Given the risk-off / risk-on trading volatility, we took a step back to analyze macro trends and make a data-driven conclusion about the environment.

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