In an industry where two distinct research camps exist – one that takes a fundamental approach to research, the other technical – we don’t choose sides. Instead, we look for opportunities that are supported by both fundamental and technical tailwinds.
Our reasoning is simple. The majority of stock market returns over the last century can be attributed to only a handful of companies. Over time, those companies exhibited both the strongest fundamental characteristics and the strongest technical trends. In other words, fundamental and technical analysis, when done correctly, will come to the same conclusion. We’re all looking for the stocks on the edges of the distribution curve. By leveraging a hybrid approach, we increase our odds of finding those fat tails.
Two camps also emerge when it comes to choosing an active or passive approach to investing, and in that debate, we do choose a side: active investment management. Making money in the market is easy. Most of the time, prices go up, and it’s great to be a buy-and-hold investor when they do. But when the tide invariably turns, it’s important to manage risk. Too often, we’ve seen so-called ‘passive investors’ abandon their strategy at the worst possible time, because the losses they sustained were too much to stomach. Actively managing investments is the best way to protect your portfolio from losses and keep you invested for the long-term.
We’re also skeptical of the view that investment returns can indefinitely match those of the past – and even the track record of the past is less rosy than many believe. A passive approach is a gamble that past performances will repeat themselves and that you won’t be unlucky in the timing of your birth. That gamble might pay off, but we prefer to save our luck for the blackjack table.
The better tactic, in our view, is to search for sustainable trends in markets. By doing so, we hope to find assets that can outperform during bull markets and preserve capital during cyclical declines. That’s the value of active investing.
At Grindstone Intelligence, our weight-of-the-evidence approach is designed to do just that: add value. We incorporate a data-driven, safety-first approach to investment research. We look at markets through a macroeconomic lens, then utilize a top-down approach to identify the best opportunities among each asset class, sector, and industry. We diligently analyze economic data and study price trends, relative strength, and intermarket relationships to help our subscribers be better active investment managers.