Investment Process
Our tactical investment process is a rejection of traditional buy and hold investing. We believe that being fully invested in equities during periods of intense speculation and monetary tightening within an overvalued market is unwise. In contrast, we believe there are market environments in which investors should be fully invested and at times should over-weight higher beta sectors and indices. Our goal is to be in concert with the overall economic/business cycle. We believe this alternative investment process is a more prudent way to grow investors’ capital over time.
There are four pillars of our investment process. The first three pillars: valuation, monetary policy and investor sentiment are qualitative in nature and our final pillar is a quantitative assessment of volume and breadth based momentum. The initial part of our decision making is to determine our level of market exposure. Next we decide which type of exposure has the best risk/reward characteristics. We use relative strength and relative value models; comparing each segment of the market against the others. Typically, we use the following indexes: S&P 500, Russell 2000, S&P MidCap 400, Nasdaq 100, Dow Jones 30 and MSCI Emerging Markets Index. Using a combination of qualitative and quantitative metrics, we seek to manage risk and enhance alpha by tactically phasing into and out of major equity cycles. Our goal is to be in concert with the overall economic/ business cycle.
