Desperately seeking alpha

Tuesday, 13 March 2018
Melbourne, Australia
By Bernd Struben

  • Forget the jargon…that’s just darn impressive
  • Largely untapped…but not for long
  • The ‘Silent Crossover’

I first heard the term ‘alpha’ applied to investments in 2007.

You’ve likely noticed that we generally avoid this type of ‘financialese’. The kinds of obscure words and phrases intended to make you feel ignorant.

Like talking about a haircut, rather than simply saying a write down or loss.

When you struggle to understand the terminology, it makes the finance industry sound more complex than it really is. Which, conveniently, encourages you to seek the help of a financial planner. Someone who can make sense of all the industry jargon.

Anyhow, in 2007 I’d just hung up my hat as a travel and adventure writer to take a job covering commercial real estate investments in Europe. And my first assignment was to cover the Commercial Mortgage Backed Securities (CMBS) conference in Brighton, UK.

In 2007 the lucrative CMBS market was just months from the peak of its bubble. But you wouldn’t have gotten that from the speakers or attendees. Confidence was running high. Money was being made hand over fist. And the advice I walked away with was ‘leverage up’.

In other words, the money managers making the biggest returns were those with the most debt. Well, you know how that worked out for them.

Despite the good times, everyone wanted more. And to do that you needed alpha.

Alpha, in plain English, is the outperformance of an investment relative to some benchmark of similar investments.

The kind of alpha they were seeking at the CMBS conference was driven by human talent. Unfortunately, even the most talented humans rarely outperform their peers more than one or two years running. And often the outperformance is only a few percent.

Now beating your benchmark returns by 2% two years in a row is nothing to be ashamed of.

But how about beating the benchmark by 50.06% for a period of almost five years?

That’s precisely what Sam Volkering has achieved since launching Revolutionary Tech Investor in June 2013.

More, after the markets…

Markets

Overnight, the Dow Jones Industrial Average closed down 157.13 points, or 0.62%.

The S&P 500 lost 3.55 points, or 0.13%.

In Europe the Euro Stoxx 50 index finished up 8.94 points, or 0.26%. Meanwhile, the FTSE 100 fell 0.13%, and Germany’s DAX rose 71.71 points, or 0.58%.

In Asian markets, Japan’s Nikkei 225 is up 9.28 points, or 0.04%. China’s CSI 300 is down 0.35%.

In Australia, the S&P/ASX 200 is down 32.92 points, or 0.55%.

On the commodities markets, West Texas Intermediate crude oil is US$61.30 per barrel. Brent crude is US$64.91 per barrel.

Gold is trading for US$1,324.65 (AU$1,681.88) per troy ounce. Silver is US$16.56 (AU$21.03) per troy ounce.

One bitcoin is worth US$9,232.69.

The Aussie dollar is worth 78.76 US cents.

Forget the jargon…that’s just darn impressive

In Friday’s Port Phillip Insider, Kris Sayce sent you a link to Port Phillip Publishing’s annual Alliance Report Card.

If you haven’t had a chance to read that yet, I encourage you to take a close look. It’s our best effort at offering you an unbiased view of how every one of our advisory services has performed.

You’ll see that a few services have not lived up to our high expectations to date. While others have exceeded those high expectations.

But only one service — out of a grand total of 20 — scored the top grade of A++.

And that’s thanks to the ‘alpha’ Sam Volkering delivered to his subscribers over at Revolutionary Tech Investor.

You can see that alpha in action in the table taken from the report card below. It shows the results of the recommendations made in Revolutionary Tech Investor over several time periods.



chart image

Source: Port Phillip Publishing
Click to enlarge

As you can see the 69 trades Sam has recommended since June 2013 have delivered an average gain of 57.2%. That’s 50.6% better than the ASX 200.

Using February 2016 as a starting date, when the bull market began to really run, Sam’s returns are even more impressive. The stocks on the buy list returned a whopping 70.69% average gain, beating the ASX 200 benchmark by 52.69%.

Now, as Kris mentions in the report card, you’ll see the annualised returns are lower…though still very impressive. That’s because of the relatively long holding period for many of these trades, which works out to an average of 710 days.

Even so, Sam still beat the annualised returns delivered by the ASX 200 since February 2016 by a stellar 21.95%.

And he’s not done yet.

According to Sam, three tech stocks alone could drive the average gains of the Revolutionary Tech Investor buy list to all-time new highs in 2018.

(Details here.)

Largely untapped…but not for long

Sam covers the full range of technology stocks. And he’s enthusiastic about the potential of every tech sector to produce highly profitable companies.

But there’s one particular sector he envisions will really hit the boiling point this year.

In Sam’s own words, the companies at the forefront of this new revolution, ‘could be the most exciting investment opportunities I have ever seen. Opportunities that could be bigger than the dotcom boom. Even bigger than the crypto craze…’

It all has to do with cracking what Sam calls the ‘Black–Box’ equation. An equation that Silicon Valley’s tech giants are spending $36.8 billion to solve.

But Sam’s not recommending any of the biggest players. Instead he’s pinpointed three smaller stocks he believes will gain the most as the Black–Box equation gets unravelled.

This will open the door to better and faster machine learning…and true artificial intelligence (AI).

And the demand for AI, even today’s more rudimentary variety, is booming.

From The Sydney Morning Herald:

Increasing numbers of Australian businesses are using AI in their sales processes.

Sales platform Salesforce estimates it is handling a billion queries every day using its AI system, dubbed Einstein, which is used across small and large businesses.

Founder and managing director of the marketing and sales business Marty Nicholas, told Fairfax Media… “I think at this stage [AI] is largely untapped… What a lot of people fail to realise is to get value out of AI you need a rich set of data for it to work with.” …

Toby Walsh, Scienta professor of artificial intelligence at the University of New South Wales, says the continued rise of AI is inevitable.

“Eventually it is going to be like electricity, it is going to be interwoven into the fabric of our lives and almost everything will use AI,” he says.

Walsh says AI offers huge opportunities for businesses.

The demand is clearly there.

And the opportunities for businesses that are positioning themselves today for tomorrow’s tech breakthroughs could indeed put the gains seen during dotcom boom to shame.

If you haven’t already, you can find out Sam’s three favourite ways to play the continued rise of AI here.

The ‘Silent Crossover’

You should have received an email from small-cap investing guru Ryan Dinse earlier today. If you missed that, please check your inbox.

It’s all about a brand-new whitepaper Ryan’s been working on behind the scenes for the past several months. A report that will shed light on one of the darkest secrets of the professional investment industry.

Namely (spoiler alert!) how institutional investors legally manipulate the prices of stocks. And how you can follow the money trail to get into these stocks before their wall of money sends the share price through the roof.

To reserve your free copy of ‘How to Profit from “Silent Crossovers”’ simply sign up here.

And finally, this from The Australian Tribune:

The Greens Are Coming for Your Car

Electric cars are coming to Australia. Slowly.

By and large, the gradual transition will be a good thing. So long as they are brought into the market by market forces. Meaning people want to buy them. And manufacturers want to build them.

But mandating the use of electric vehicles and banning petrol cars, as the Greens propose, will destroy a vital element of competition. And it will leave Australians with inferior vehicles to…

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd