Hortz: In your opinion what tools are required to exploit dispersion and a flat to downward market cycle?
Pellegrinelli: Trends are the ultimate driver of performance. But how can you read and capture price trends? How can you maximize the exposure on some of the top performing stocks while avoiding the underperformers?
Fundamentals and other conventional metrics and approaches can be a good starting point, but they are not enough. Some quality stocks can still be part of the bottom performers. And amongst the top performers, we can find securities that were not part of the preferred list, a missed opportunity.
The market may or may not reward whatever metric or criteria is used. A good fundamental story does not necessarily turn into a rewarding investment. What counts is the actual market reaction in terms of price action. Facts win over assumptions. Trends win over expectations.
Therefore, a second level of quality control is required—a “trend validation” that either confirms or challenges the selected investment ideas and provides a critical sanity check around the forces at work happening around the stock.
Hortz: Can you offer any recommendations or advice to help active managers?
Pellegrinelli: Profiting from dispersion and downward market cycles requires specific data and tools that can measure and validate trends. Well, this is our mission. We offer a new, different set of analytics to capture price trends and exploit dispersion by filtering out market noise, arguable opinions and conventional research.
We developed a methodology to rate trends designed to assess the true direction and quality of trends and to promptly identify trend reversals that is used today by hundreds of institutional clients worldwide. Our innovative tools provide a layer of logical market intelligence that deciphers the money flow across sectors and stocks and delivers measurable results. Positive ratings (A and B) validate your investment ideas and spot new opportunities. Negative ratings (C and D) help you avoid drawdowns and control your portfolio risk.
The goal of active management is to exploit performance dispersion by capturing the winners and avoiding the losers and, by validating and reading price trends, it is possible to maximize returns and avoid the dependency on the indices for performance.
We invite financial professionals to explore our asset management toolkit on Bloomberg or visit us on our website to see how we work with professional investors. The evolutionary trend toward higher standards of value and efficiency by combining elements of both human knowledge and technical innovation will force a change away from the status quo. Our proposition is simple and clear—get the price trends right and actively capture performance and apply higher degrees of risk management by profiting from dispersion, even in flat to downward market cycles.
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