With a roll-over in key variables associated with economic activity, the aggressive earnings growth expectations embedded in the consensus outlook for industrials stocks is worrisome. Relative estimate achievability into 2022 seems way below average for this group, and we would be selling longs / initiating new shorts today.
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.
Our latest market overview: a comprehensive document containing the best of our recent work and up-to-date views.
Our consumer activity gauge leads us to believe the US consumer remains in solid shape. With August consumer earnings showing more large beats than misses, but also some stock volatility following the earnings reports, many investors have been asking about the consumer playbook from back-to-school through year-end…
We believe that the second half of the year should be good for alpha generation. On inflation, we see disinflationary forces eventually surfacing again. The cycle is rhyming the 2009-10 recovery in many ways. We prefer large cap. over small but would be balanced on growth vs. value…
We have traditionally used valuation dispersion, company-specific risk, and pairwise correlation as quantitative metrics to suggest whether the environment is reasonable for alpha generation. In summary, the environment has looked more attractive than average. Yet, few managers have been performing in-line with our expectations. Hence, we analyzed the data with more granularity and found five meaningful reasons why alpha generation has been more challenging in 2021…
We have just seen historic upward revisions for cyclicals. We created a framework including profitability, stock performance, and valuation to discriminate between cyclical industries following strong upward revisions. We found that…
Many US equity managers have substantial positions in Chinese ADRs like Baidu, Alibabe, Tencent, and JD.com. With Chinese equities sharply selling off over the last several weeks, we investigated BATJ exposures through the lens of US equities. We conclude that US investors need to be highly confident in the alpha from BATJ to take on the incremental risk of owning them…
We take a detailed look at the banks sector and uncover four investment controversies facing bank stock investors and three data points to monitor. We think these concepts apply broadly to investors in other industries as well…
We created twelve proprietary indices using over 100 variables that systematically process “macro” data. We smooth and transform the data to create twelve gauges of where we are in the investing world today. We then measure model efficacy during various regimes and use performance to recommend gross exposures. Today we recommend grossing up the following…