Technical Analysis is the Graphical Depiction of the
Everyday Battle Between Informed Buyers and Sellers
Stock prices are driven by supply and demand—as a company's outlook or fundamentals improve, the shares become more desirable, and its price is driven higher.
The biggest driver of demand is large institutional investors, staffed with armies of bright and well-connected analysts.
Every day, the collective brilliance and breadth of the market battles for position—buyers leap in, sellers bail out. Rather than choose which side we think is correct, both of which have far greater knowledge and access to information than we do, we stand back, observe trends, and identify sectors and stocks for which bulls appear to be winning the battle.
We join once we believe we’ve identified a stock or sector for which for which bulls appear to have the upper hand.
Practically speaking, we analyze 1,000 charts each week to look for recognizable patterns in price and volume data. By viewing where a price is going, and how much conviction is behind it—measured by the volume of shares—we believe we can leverage the vast knowledge of large and well-connected firms.
Principles Based--Not Rules Based
Our disciplined process follows our investment principles, not arbitrary rules. Markets are too complex, and driven by too many variables, to define a stock with just a few categories.
Rules-based index funds attempt to cram every stock into a style, size and sector category, regardless of how good the descriptor is. The end result is a watered down version of the exposure you think you’re getting.
•Style – We only pick stocks that have true long term growth potential—we don’t lower our standards just to meet a requirement to have a certain number of holdings
•Size – When a market cap gets too large, rules-based small cap funds are forced to sell, missing out on the increased demand as larger firms become natural buyers
•Sector – Rules-based investors are forced to own exposure to all sectors of the economy. If a sector has minimal growth, we’ll have minimal exposure