Over the last few Market Outlooks, we have been discussing Surevest’s investment philosophy that are underpinned by three pillars:
- Dynamic Investment Process: The investment environment is not the same across time.
- Data Driven Approach: We must use supporting evidence that is statistically significant.
- Rules-Based Decision-Making Process: Minimizes emotion and cognitive biases in our investment decisions.
This week we will be focusing on the second pillar: Data Driven Approach. The investment committee segments the investment world into a macro and micro view. The macro view focuses on the big picture, such as what region and countries in the world have a positive investment outlook. We then move to a micro view that focuses on sectors and individual companies.
Both the macro and micro approach is further broken down into three segments:
- Empirical Evidence
On the macro view, we collect and analyze quantitative data on region and country gross domestic product (GDP), labor market, inflation, currency, fiscal policy, monetary policy, and valuations. In addition, we look at qualitative data, which is information that is not easily quantified, such as the way the leaders in those countries view world trade and protect property rights. We then observe how the quantitative and qualitative characteristics have played out in the past and likelihood that our thesis will hold in the future.
On the micro view, we follow the same three segments. We collect and analyze quantitative data on sectors and individual companies, such as revenue growth, profitability growth, margin expansion, valuations and competitive advantage. Next, we review quantitative data, such as good environmental, social and good corporate governance. We then observe how our quantitative and qualitative observations have turned out in the past.
In upcoming quarterly commentaries, we will build on this process with supporting data. Should any questions arise, please feel free to contact us.
Next, week we will discuss our final pillar: Rules-based decision-making process.