A short guide to our approach

It is important to understand the macro environment we are in. It is similar to having a weather forecast, which helps make more informed decisions, adapt to the situation, and avoid hazards.

When it comes to investing and speculating, there is no certainty, only probabilities. We have an open-minded approach.

We make the distinction between investing (owning something that pays you) and speculation. (buying an asset with the presumption that the price will appreciate over time)

Each action should have a different strategy.

• For investing: Assessing the opportunity cost of holding the yielding asset in the current macro environment.

• For speculating/momentum strategies: Looking for good risk-reward trades. Defined risk in each trade, based on risk tolerance and estimated asset volatility.

Every good investment is also a good speculation.

The distinction is in the fact that you are paid to wait for the thesis to play out.

Our investment philosophy was shaped by our mentors, market history, experience, and tape watching. (the price action given the news flow)

When we talk about diversification, we mean geographical, sectoral, and asset-type diversification, etc.

We are using long-only strategies, giving the risk-reward, and do not want to fight the secular trend in equities. (the upper drift)

Our main analysis is fundamental, but we use technical analysis to track flows, find good entry/exit levels, and observe market behavior.

When we refer to being contrarian, that is reflected in terms of positioning, not fighting trends. Here we find good risk-reward trades in unloved sectors essential to the global economy.

Our edge comes from being analytical, disciplined in following the process, and always trying to improve.

Some patterns that we recognized:

• The market tends to overreact to the news, having a manic-depressive reaction. We do not use leverage to avoid being shaken out of a position by the volatility these events create. This volatility unintuitively provides us with good opportunities to enter/exit positions.

• Many companies under our radar have been acquired and taken private. The value that we see in some stocks is recognized by private equity firms, other smart money institutions, and investors.

• When everybody is in consensus, something different almost always happens. That is why we like to buy panic and sell exuberance.

One of the sentences that reflects our investment philosophy and process was said by Howard Marks:

“There are no bad assets, only bad prices.”

Disclaimer: This newsletter is for educational and informational purposes only and does not constitute investment advice. The author may hold positions in the assets discussed. 

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