In the Strategy Builder, the “Insights” section offers performance-based analysis and ranking of individual fundamental metrics and combinations. This feature allows you to discover which selection rules are most productive for any market or sector. You’ll find that some sectors favor growth metrics, while others lean towards value metrics. You can mix any fundamental data you like and test performance across a 10-year period. By blending your chosen fundamentals with trend validation, you can assess the impact of a trend overlay on the performance of your selections over time.
es, combining multiple parameters generally improves returns by refining the stock selection process. However, it is important to carefully choose the right combination. Pairing strong fundamental metrics with trend validation often leads to the best outcomes. The reasoning is simple: the highest-performing stocks typically exhibit both solid fundamentals, which drive price growth and validated positive trends, which reflect investor confidence and market strength.
Performance dispersion is the distribution of stock performance within a given investment universe. For instance, in 2023, the S&P 500 gained 24%, but the bottom 25% of performers (125 stocks) lost an average of -17%, while the top 25% gained an average of 50%. This disparity is a constant feature across all stock baskets, regardless of their criteria (Market Cap, Value, Growth, ESG, etc.).
Price trends are influenced by factors such as:
These factors drive trends that are increasingly disconnected from fundamentals, as macroeconomic conditions and a rapidly changing global competitive landscape contribute to trend acceleration.
Performance dispersion offers both a challenge and an opportunity for active managers. It allows for the potential to capture the top performers while avoiding significant losses, ultimately boosting returns. By effectively taking advantage of this dispersion, active managers can control trend risks, reducing the impact of underperforming stocks and improving overall portfolio performance.
Trend risk arises when stocks with solid fundamentals and positive analyst ratings begin to fall, entering a bear phase that is difficult to predict. Similarly, even stocks with high-quality metrics can show weak price action that persists for months. These scenarios can severely harm portfolio performance. Trend validation offers a more comprehensive view of price trends, helping to mitigate this risk.
Assessing the direction and quality of price trends requires specialized analytics that can filter out price noise and volatility. Trendrating’s multi-factor model, developed through extensive testing, provides a clear differentiation between bull and bear trends. This enables active managers to make better-informed decisions, aligning portfolios with stocks showing positive trends while reducing exposure to underperforming ones.
Trendrating captures trends early, enabling investors to profit from bull markets and avoid bear phases. By focusing on the direction of price trends, investors can make more informed decisions, ultimately increasing the potential for superior performance. Unlike traditional models, Trendrating filters out market noise, providing a clearer view of underlying trends.
Trendrating identifies market winners and losers by assigning trend ratings (A and B for bull trends, C and D for bear trends). Focusing on A and B-rated stocks while avoiding those rated C and D can improve both returns and risk management. This approach has a measurable impact on performance, offering active managers the insights needed to optimize their portfolio decisions.
Trendrating’s solution is based on a pattern recognition algorithm that processes vast amounts of data. This algorithm employs a multi-factor analysis and utilizes a self-adaptive, flexible time window. When various factors align, there is a high probability that a significant trend is in place. The dynamic time window allows for more timely identification of emerging trends, while the multi-factor approach effectively filters out price noise, short-term volatility, and false signals. Developed through years of research by professionals with over 20 years of experience and a proven track record in building cutting-edge models, Trendrating’s methodology was refined after testing hundreds of analytical combinations across 25 years of market history and 20,000 listed securities. The final model has been live since 2013.
Traditional technical analysis and momentum investing often generate inconsistent results across different market cycles. Trendrating’s pattern recognition algorithm is faster at identifying trends, providing a more timely and accurate assessment of market movements, free from the noise that can cloud traditional approaches.
Trendrating analytics are designed to capture those trends that last from few months to several quarters. The methodology supports the capture of a large part of the best performing stocks while at the same time helps avoiding a good number of the worst performers. Therefore integrating Trendrating into the investment process can generate measurable results in terms of improved performance management. The impact can be measured and tracked every month as it is easy to see at the statistical level how sound and recurrent is the fact that stocks rated A and B on average outperform those rated C and D.
Not at all. Most of our clients use Trendrating analytics as a valuable complement to their existing decision-making process. For instance, within any universe of stocks that meet specific fundamental criteria, there will be both top performers and mediocre ones. Our clients then use Trendrating analytics to refine their stock selection or adjust their exposure by overweighting securities rated A and B, while underweighting those rated C or D. This simple approach enables them to enhance returns and reduce risks. The impact is fully measurable and trackable.
We document the edge we provide on our website in the Trendrating Market Reports and The Trendrating Edge pages. Most importantly, anyone can easily access our data and technology to test and track real-time results. We offer a free trial to allow you to evaluate and validate the value we deliver. Our approach is fully transparent and measurable, with monthly analysis comparing the performance of stocks rated A and B versus those rated C and D. This provides a clear and straightforward way to address any scepticism.
