Alpha Theory

“The batting average for our clients was right around 51%. This is on an alpha adjusted basis, so the top 10 positions was 57%, next 10 was 55, next 10 Was 52, and then it went into, right after 30, it sort of went into randomness. Basically, it was a coin flip…”

“On average, our clients assume they're going to be right 74% of the time. But guess what? They're only right 51% of the time. So there's a big gap, and we can point out those gaps. We call it probability inflation.”

“The top was around nine percent return on invested capital. The second was like seven. The next was like three. The bottom was like zero. And there is a distinct correlation, at least in our small sample size. Once again, keeping in mind the small sample size,…”

“We find managers should be trading around positions more. They're generally not, and the positions that's easiest to ignore is the one that's working and making you money, and so what happens in that situation is the price is going up, which means the position…”

“I think it's something that's specific to all forms of decision making is that we take things that are generally implicit and we use them to make decisions when we're better off taking things that are implicit, making them explicit, using those explicit assump…”

“It's basically seven percent was the return on invested capital for positions with price targets. One percent was the return on invested capital for positions without price targets.”

“Really the question that an allocator could ask is say, hey, what's your sixth best idea? And pause. And wait for them to tell you what their sixth best idea is. Now, if they can turn to a sheet, or a dashboard, or something like that, that says, that's my six…”