Step 1 – you can run a comparative analysis of different fundamental metrics to learn the actual contribution and discover what fundamentals better capture the outperformers. It is interesting to see the difference in performance across the single metrics.
Step 2 – you can then explore a few combinations with two fundamental parameters to discover if and how it is possible to improve returns. Exploring alternative combinations of fundamental rules can lead to discovering superior strategies to select stocks. It is possible to maximize the performance using a combination of fundamental metrics that enables a better selection and higher returns.
Step 3 – after selecting the best combinations in step 2, you can add a level of “trend risk” control to validate positive trends and avoid stocks in a bear phase. A sound plan should incorporate this type of price trends valuation element to better assess risks and opportunities across sectors and stocks. When consistent selling pressure overwhelms good fundamentals, a bear trend takes place, irrespective of any reasonable assumption.
Acknowledging and respecting trends is a sound practice. Capturing trends is the essence of successful investing. Ignoring trends is negligent and unsafe in this tricky market cycle.
Hortz: Can you provide some recommendations and advice to active investment managers on using advanced analytics tools like yours?
Pellegrinelli: Be open to trying new investment analytics and technology by realizing that they are being designed to leverage your skills and help maximize your performance, not replace you or your core investment strategies. Use the technology to reassess the facts, easily test your current metrics, explore new ideas, gain insights, add more quality boxes, expand your knowledge, and better support your decisions.
Trendrating solutions provide additional market intelligence to navigate this new regime. More than two hundred institutions use our advanced analytics as a critical component of their optimized investment decision process. We invite active investment managers to contact us for a free test and evaluate the new standards of market intelligence they can use to tilt this new regime from a challenge into an opportunity.
The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We operate as a business innovation platform and educational resource with FinTech and financial services firm members to openly share their unique perspectives and activities. The goal is to build awareness and stimulate open thought leadership discussions on new or evolving industry approaches and thinking to facilitate next-generation growth, differentiation and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors — Ultimus Fund Solutions, NASDAQ, FLX Networks, Advisorpedia, Pershing, Fidelity, Voya Financial and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines).