We believe that many investors have an imperfect understanding of where alpha comes from.
Most think in terms of picking winners
when we believe their goal should be to avoid losers.
A loser is a company that cannot deliver the revenue growth indicated by its stock price.
Important Disclosure
The snapshot is being provided for illustrative purposes only and should not be construed as providing investment advice or as a recommendation to buy or sell any particular security. This snapshot is taken at a particular point in time and any analysis or information contained in it is outdated and should not be relied upon. Past performance is not an indication or a guarantee of future results. For full disclosure click here.
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has a range of potential revenue growth possibilities. To determine this range, we take ’s revenue growth from the past 12 quarters and conduct 10,000 statistical simulations.
This process generates a mean revenue growth rate of and a range of revenue growth possibilities for from most to least likely.
We believe ’s stock price of indicates revenue growth in the future of .
To calculate this growth, we use ’s stock price of and accepted valuation methodologies to calculate ’s indicated revenue growth of .
To Identify if is a losing stock, we calculate the probability that indicated revenue growth of is within the range of revenue growth possibilities.
There is a probability will fail to deliver the growth indicated by its stock price of .
It’s the h-factor and in our process a lower h-factor is better.
The h-factor is the probability the company will fail to deliver the growth indicated by its stock price.
The risk is caused by humans impounding vague and ambiguous information into stock prices in a systematically incorrect way.
high h-factor
low h-factor
The probability that a company may fail to deliver the growth indicated by its stock price.
Risk caused by humans impounding vague and ambiguous information into stock prices in a systematically incorrect way.
h-factor ranges on a scale from 0-100%, and a lower h-factor is better.
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