Research

Many long-only portfolio managers do not view utilities as particularly important, given the bench-weight is around 2.6%, and most hedge funds do not cover the space. However, as the market has been declining, and it feels late to short hyper growth stocks (many of which are down more than 50% YTD), our view is that CIOs should be looking to the utilities sector to find short ideas. In this note, we examine utilities front to back and give our case for why this sector is underexamined and what to look for in short/long ideas.

Our latest market overview: a comprehensive document containing the best of our recent work and up-to-date views.

In this note, we digest and analyze the first 10 days of earnings season, with a focus on three major themes: the US consumer, growth stocks, and a recap of earnings. All things considered, we continue to recommend energy as our top sector and offer seven reasons we are still bullish.

During our recent investor meetings, four topics have consistently surfaced. We address those questions in today’s note. Topics include whether the market is discounting higher rates, growth stocks, energy, and the greater meaning of the recent NFLX miss.

Over the past several months we have researched the implications of management decision-making, by analyzing various capital uses and their consequences. This our fourth of five studies, as we previously have analyzed buybacks, dividends, and M&A. In this note, we investigate trends in the levels and changes in capital and R&D intensity, current trends, and the efficacy of these signals in terms of predictive value for stock performance.

Our latest market overview: a comprehensive document containing the best of our recent work and up-to-date views.

At the start of each quarter, we provide a detailed summary of the just completed quarter with the goal of helping investors make better investment decisions, in addition to provide insights that will facilitate investor communications, client conversations, and quarterly letters. Furthermore, our quarterly report seeks to identify emerging risk management concerns and give investment advice.

A key investment debate today is whether the Fed can “thread the needle” and raise rates without causing a recession. Given that the US consumer is so pivotal to the recession debate, we analyzed key metrics that make up our proprietary consumer gauge and looked at margins and multiples for various consumer stock cohorts to find dislocations and opportunities – and have a few observations and recommendations.

We detail some of the unique aspects of our quantitative framework, including cohort formation, signal transformation, dynamic grossing, and risk management. We believe this approach can be useful for bottom-up stock pickers seeking to pick from a better pool of names, rigorously manage gross exposures, and avoid risks such as crowding.