Research

What Really Happened in Q3 and Q4 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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How to Identify Compounders

If you want “compounders” focus on companies that consistently have YoY gross margin growth. Persistent gross margin expansion is a better predictor of future returns than sustained revenue growth or net margin expansion, though all are better than just picking the stocks that went up the most consecutive quarters relative to the market.

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Industrials Will Underperform

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.

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Trivariate’s Quantitative Framework

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.

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Consumer: 2 Strategies for Investing in Consumer Stocks

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…

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Trivariate’s Second Half Outlook

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…

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5 Reasons Alpha Generation Has Been Challenging and 3 Ways to Deal With It

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…

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Cyclicals: Are You Sure It Is The Top?

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…

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