We aim to create value for our readers by giving them our views on the financial markets. So in order to understand whether we can be a potential fit (or an upgrade) to your investing journey, we will try to answer the following topics as how we see it:
The philosophy of the business is to drive growth in our capital by examining market research and taking beneficial risk-reward decisions. Our business profits from keeping a leveled sentiment on the market. Investments are selected based on the simple question: Will the company benefit from holding the asset in its portfolio?
The strategy is not complicated. The portfolio mainly has two components; to acquire short-term holdings and long-term holdings. With these two components, we try to achieve a long-term yielding portfolio. We accomplish that by turning short-term gains into long-term assets. We determine our short-term investments based on market research, where we try to forecast possible events or be better informed about the upcoming quarterly earnings to access the direction that would benefit our position. For our long-term investments, we copy Warren Buffett, where we choose proven companies that have represented themselves as staples in the current market. They need to show a strong competitive advantage and have stable returns on invested capital. Portfolio management is crucial to retain a leveled sentiment on the markets and because we consider being great at both, we feel certain our strategy will be successful.
We believe that holding between 15-25 positions suits best to achieve our goal. However, it might be the case that we hold 2 positions in companies that are very alike. In that case, we would count that as 1 position, as these two companies will have a very similar return over the long term. We truly believe in the Modern Portfolio Theory (MPT) by H. Markowitz, where the optimal level of return, respectively to risk, lies around 20 stocks in a given portfolio. Afterwards, the portfolio will represent a very similar return to the market, also known as the return for the systematic risk (market risk).
Fundamental Analysis and Technical Analysis:
For the vast majority of our research, we will heavily rely on fundamental analysis to make our assessment of to whether invest or not. However, we will use technical analysis also because in some cases it does truly work. We believe there is a symbiotic relationship between the two, which is that fundamental analysis looks at the past and current financial statements to make possible projections for the future. This usually results in some price target given by an analyst at an investment bank or research firm. However, the price levels between the current price and the expected price from the fundamental analysis will experience swings, resulted from both emotional traders (behavioural finance) and technical analysis traders. Therefore, we conclude that for shorter timeframes technical analysis might outweigh the importance of fundamental, yet we will mostly rely on fundamental analysis as indicated before.
Value Stocks and Growth Stocks:
We believe that in the ideal portfolio, there should be a fair mix between the two categories. Yet, the golden question in finance remains what exact allocation should be given between the two options (and to further expand the problem, the allocation between each individual company). Our vision is that there are trends in large timeframes between value vs. growth, just like there used to be a “bond cult” there is now an “equity cult” and more specifically a “growth stock cult”. We believe that this will slowly transition into value, and then into bonds again, just to repeat the cycle of the very large timeframe.
Similar to the value vs. growth story, bubbles come and go. Therefore, a continuous understanding of the capital markets will allow us to navigate the markets with the waves of bubble cycles.