In April of 2020, EDS hosted a webinar alongside our partner MSCI Barra. A few of the topics discussed:
- How are fundamental investors using factors TODAY, without compromising the investment process?
- Learn how investors use factors to reduce risk, and find new ideas to match their investment philosophy.
For example, a question we hear often: How much of the price return is based on factors (things) outside my control?
- SHAK’s Price Return for the YTD is -35.75%.
- But, exposure to multiple factors explains a stock that should be down -49.39%.
- That means Alpha of 13.64% was created. Congrats!
- The Market only accounts for -20.93% of the losses.
- SHAK’s exposure to the consumer sector adds another -21.46%.
- But, the fact that SHAK is a Small Cap Name has hurt the company by -6.20%.
- Size (meaning larger stocks) has outperformed over this period, contributing 3.53% to the performance of the world markets. This means that a large portion of SHAKs negative performance is attributable to being a small company.
- Large stocks haven’t performed this well since the early 2000’s.
- SHAK could have a tailwind if investors return to smaller names.
- Perhaps we can add to SHAK or look for other small names where fundamentals haven’t changed
- Filter for new ideas based on unique opportunities and insights (ex. Small Size and High Leverage)