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Algorithms Are Driving Returns

Posted by Bill Moore

Jul 2, 2014 6:00:00 AM

Google is doing it - in more ways than one.   Algorithms.   It does it on its site, and it does it in its car prototype.  As they note in their own official Google blog post, "a self-driving vehicle can pay attention to all of these things in a way that a human physically can’t—and it never gets tired or distracted.

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Topics: rules-based strategy, Algorithms

April Showers Bring May Returns

Posted by Bill Moore

Jun 30, 2014 6:00:00 AM

According to Evestment.com, hedge fund performance was positive in the month of May, rebounding from a slight decline in April. The industry returned 1.23% during the month and is up 2.20% YTD, on pace for an annualized return of 5.36% for the year.   Not great, but comparable to the major indicies.  Again, we reiterate many times in this blog, the hedge funds need not complete with the standard indicies to be an attractive product.   Managers should be seeking appropriate risk-adjusted returns.   However, the pressure is off when they can beat the market too.

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Topics: Fundamental Analysis, Alpha Generation

Bubble Trouble?

Posted by Bill Moore

Jun 26, 2014 6:00:00 AM

As the old saying goes, prognosticators have predicted eight of the last three recessions.   The same can be said for bubbles.   Incentives motivate Wall Street economic forecasters and many analysts to always be optimistic about the future, and for the media and bloggers, there is an incentive to always be bearish, because bad news drives traffic.  

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Topics: Damodaran

Back to the Future

Posted by Bill Moore

Jun 24, 2014 1:40:19 PM

Although the economy has sent some mixed signals about its health, it is clear the overall GDP has continuously surprised to the downside.   First quarter estimates, which peaked in late '13, saw a set of revisions by the economists, followed by a disappointing actual, followed by two downward revisions by the BEA.

 

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Topics: Backtesting

Shift to Value?

Posted by Bill Moore

Jun 11, 2014 7:00:00 AM

Last Friday, Fortune wrote a piece on Hedge Fund concentration and strategy pursuit.  [http://fortune.com/2014/05/28/the-real-reason-hedge-funds-have-been-underperforming/]   Hedge Funds fall under the category of Alternative Investments, but it should be noted that the title isn't "Unique Alternative Investments."   Credit funds, event strategies and long/short equities often share similarly looking portfolios.   As Fortune notes, " Hedge funds have long been accused of clustering, or crowding into too many of the same trades — whether their herding behavior is better or worse than that of other institutional investors is a matter of much debate."  

A recent Goldman Sachs analysis of the "VIP" stocks, the 50 stocks most commonly held in large quantities by 777 hedge funds, found the group suffered its worst monthly return outside the "crisis periods" of 2002, 2008 and 2011.   Long holdings like Google (GOOG), General Motors (GM) and Citigroup (C) each lost money through the analysis period of mid-May.   The basket as a whole underperformed the S&P by about half.  

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The End of Long the Short

Posted by Bill Moore

Jun 9, 2014 11:05:00 AM

As reported on Zero Hedge, constantly since 2012, going long the most shorted names remains the best alpha-generating strategy, outperforming the broader market by orders of magnitude.   Bloomberg has followed with an article that notes that in the U.S. equity market, the worse a company’s finances, the better it’s doing.  Stocks with the weakest balance sheets have climbed more than 8% in 2014 and 94% since the end of 2011, generating almost twice the gain in the S&P 500.

While some of this can be attributed to a systematic short squeeze, much of this can be attributed to the Fed's zero interest rate policy (ZIRP) and the perceived elimination of risk.  The worst names have gone up more than the best names.   That conceptual reversal, which has dominated most of the last five years, has been a burden for many long/short managers.   Unless a manager holds a significant long bias, in many cases, the short names are overpowering the portfolio.

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Topics: Back-testing

Benefits of Multi-Factor Analysis

Posted by Bill Moore

Jun 4, 2014 9:11:11 AM

The benefits of multi-factor analysis can be demonstrated by examining Model Portfolios. Bloodhound's strategy library includes several multi-factor Model Strategies developed by experts that range in style from conservative to super aggressive. The strategies reflect traditional investing strategies followed by a wide variety of investors, or an investment approach by a notable finance figure. Strategies range from Fundamental Growth to the Warren Buffet Diversified Yield to a number of our strategies culled from our one million deep research library.

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Topics: Bloodhound Model Strategies, Expert Model Strategies, Model Portfolios

Hedge Fund Run

Posted by Bill Moore

May 21, 2014 7:27:57 AM

Despite not being able to meaningfully contribute alpha in the near term lately, investors continue to park money in hedge fund vehicles globally. 

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Topics: Hedge Funds

A New Launchpad for Factor Investing and Strategy Backtesting

Posted by John Rowe

May 17, 2014 1:45:56 PM

We're excited to announce our new name, Bloodhound Analytics, and the launch of our content-rich website.  The website provides an immersive experience where you can download thought-provoking eBooks, learn about our AlphaFactor and BetaSmart products, and view one-minute videos showcasing the industry's fastest and most precise factor analysis and back-testing tool.  LEARN MORE

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A Couple Right

Posted by Bill Moore

May 5, 2014 10:00:00 AM

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Topics: May

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