Through proprietary Capital Investment Technologies, our firm offers actively managed alternative to traditional buy-and-hold strategy, and we can objectively monitor and manage our portfolios to seek upside return while controlling downsize risk.
Capital Investment Technologies have three major parts:
1) Capital Preservation Technology
On average, US equity market enters a bear market every 4 to 5 years. Capital Preservation Technology has a proprietary algorithm to detect the beginning of a cyclic bear market based on the aggregate earning of S&P500 companies. When the beginning of bear market is detected, portfolios enter Capital Preservation mode by gradually moving money to cash and waiting for the next bull market. The algorithm will not identify the exact top and bottom of the bear-bull cycles, and the algorithm will issue false signals at the beginning and the end of bear-bull transition. The goal is to preserve capital during the transition periods, not to grow capital.
2) Capital Appreciation Technology
Based on timeless and proven value investing principles, such as price to earning ratio, price to sales ratio, free cash flow, enterprise value, and debt to equity ratio, etc., Capital Appreciation Technology uses sophisticated computer algorithms to search all securities traded in major US exchanges, subject to trading constraints such as market capitalization or trading volume, to identify the most undervalued securities at any given time as well as calculate their respective weighting in the portfolio based on their appreciation probability.
Unlike traditional value investing screens that only gives a security either a pass or fail grade but nothing else in-between, or relies on human interpretation to post-process screened results to produce a list of potential securities to invest, Capital Appreciation Technology produces the exact list of securities and the exact weighting of each security for a portfolio.
Through the precise Capital Appreciation Technology, investment capital can achieve its maximum appreciation potential.
3) Capital Reuse Technology
Contrary to buy-and-hold strategy to put investment capital on the same securities over multi-year period, Capital Reuse Technology constantly looks for better opportunities to reuse current investment capital to buy undervalued securities by selling existing overvalued securities partially or in full. Capital Reuse Technology ensures the same investment capital work harder to participate securities mispricing opportunities.
Analytic Portfolio Implementation Platform
Based on our Capital Investment Technologies, our proprietary Analytic Portfolio Implementation Platform completely automates the process of synthesizing multiple customized portfolios and replicating portfolios into individual client accounts. Unlike traditional labor intensive equity investing processes, human emotion and bias does not exist in our platform. Following flowchart gives the software architecture overview of Analytic Portfolio Implementation Platform:
What is not in Capital Investment Technologies
Capital Investment Technologies don’t use traditional static approach that holds the same securities for a long time. In this rapid changing dynamic global investing environment, we use a dynamic alternative and believe the most undervalued securities at any given time represent the best investment to be allocated for investment capital.
Capital Investment Technologies don’t predict which securities, industry, sector, or country will outperform and don’t set any securities’ price target for the next week, month, quarter, or year. We believe the right industries, sectors, or countries to invest at any time compose of the most undervalued securities at that particular time.
Capital Investment Technologies don’t randomly buy hundreds or thousands of securities like many passively managed mutual funds, index funds, or exchanged traded funds do in order to protect against ignorance. We don’t just buy from the same 500 to 1000 popular household name securities that 70%+ of the funds’ money buy.
Capital Investment Technologies look at universe of all securities, and only buy the cream of the crop, that have the best potential to appreciate at any given time. We take calculated risk to achieve appropriate reward.
Capital Investment Technologies don’t make buy/sell decisions based on friends’, neighbors’, news reporters’, or analysts’ opinions on any single security or general market. If one can predict any single security movement or general market direction in a statistically meaningful way, he or she would have retired easily.
Capital Investment Technologies take all securities into consideration to seek long term steady capital appreciation, not betting on a few trades or on a few trading days to hit jackpot.
Capital Investment Technologies don’t take personal risk tolerance, income, assets, liabilities, cash flow, or insurance need into consideration. The only concern of Capital Investment Technologies is risk-adjusted return.
Capital Investment Technologies don’t let tax determine how to buy or sell securities. We are not tax professionals, and we don’t pretend we can take complicated tax laws from Federal and various States into consideration when developing algorithms. For tax-deferred retirement accounts, there is no capital gain tax issue. For taxable accounts, we are proud to pay capital gain tax when we make money, and we can write off loss when we don’t make money.
Capital Investment Technologies don’t use technical indicators or chart reading. All technical indicators are derivatives of price or volume, so they are always late in identifying good buying opportunities. Market movement is a very complicated issue, and cannot be simply curve fit or predicated by a set of mathematical indicators. Chart reading is subjective in nature, and it easily gives way to human emotion.