Market Analysis Guidebook- Spring 2014

James Pope |
Categories

DIS and DAT - Market Analysis - Spring, April 2014

The ultimate authority must always rest with the individual's own reason and critical analysis.
Dalai Lama

 

This communication serves as a guide to the market analysis reports.

 

Performance review by the numbers

The Performance Review of General Asset Classes

            As we know past performances is not indicative of future returns. We have read that psychologically our human brains tend to overweight recent events. This review is an attempt to step out of the mental trap of recency and view broad asset class relations over the past periods.

 

Chart Watching

                A Visual Remembrance of Where Prices Have Been

            While not being predictive charts and technical analysis adds perspective on how markets and their prices have reached the current position. This charting enables one to view relations to other assets in the past quickly with today’s technology. We take a review of the charts from long term to short term to keep from the recency trap. We jot down a few of our thoughts.

 

Fundamental review

Some Fundamental Guide Post for Inter-market Analysis

            We believe the incentive of individual investors over the long term is to position their funds toward those areas where it will be treated best. Opposing that typically short term positioning is based on where the best liquidity may exists. This review of the guide post helps to gather an idea about where those areas may be located related to others. 

 

This too shall pass

“Chicken little syndrome”

            In this section we review recent popular market news events, with an eye for a return to the median over the longer term as the current focus passes into the past and the next focus arrives. Current events can have very real and dramatic effects on current prices. We believe that trying to predict these new events, their duration and effect on future prices is poor investment policy. Reacting to the news events is very poor investment policy also. Thinking deeper about current events may add value over the long term.

 

Thoughts and comments on asset classes

                            An internal asset class model developed to provide guidance on where one may look to take profits and invest excess cash over the long term is added to the above analysis to form our general thoughts. It is referred to as the deep contrarian model to give you an idea of the models purpose. The asset classes are ranked based on  long-term past events to give us an idea of cold and hot areas. This helps to cement the willingness to hold positions against the crowd and remain patient. The broad asset class categories are broken down into small cap growth, small cap value, large cap growth, large cap value, large cap blend, large cap international, aggregate bonds, and commodities. We then share our thoughts on where we think value could be searched for and areas to limit new purchase, or even take profits.

Positions spotlight

Attempting to Maintain Longer Term Value in Portfolios

            For the portion of a portfolios allocation targeted to investment risk, we desire to analyze a five year and longer time horizon. This leads to some turnover, along with the natural liquidations. Here we list some of the buys and sells over the past period, as well as top holdings. Not all accounts received the transactions, because accounts have different objectives, risk tolerances, time horizons, starting points, and tax consequences to name a few reasons. The majority of accounts we manage are tax deferred and have a monthly withdrawal occurring to give perspective on the general account.  This listing and discussion should not be taken as advice to buy or sell. We use small (5 % or less of net worth) positions upon purchase, and expect multiple entries and exits.

Of course there is no guarantee that our outlook will materialize and risks are present in this and all investments. Our thoughts may change quickly given constant flow of information.

 

Diversified Investment Strategies

            Within our eligible investment funds we tend to utilize various strategies with an attempt to diversify the risk drivers. For communication purposes we list and categorize as follows:

I.   Timed Events

a. Merger arbitrage

b. Deep covered calls

II.  Untimed Events

a.  Liquidations

b.  Closed end funds

III.  Non Event Driven

a.  Out of favor companies with significant competitive advantages

b.  Turn around or transitions

An individual selection may not fit into any of the categories or may fit into more than one.

In this section we discuss more details of the strategies.

 

Wrap up

                We appreciate your time and the opportunity to share with you our investment thoughts.  We at DIS know that in the end you the client are in control.  We have seen from several studies that the end clients tend not to achieve the results of the fund manager, even if the investment manager is a great one.  To be different in that regards we think it’s important to have the clients understand and agree with the investment philosophy in order to improve client results.  To achieve that of course we want to educate our clients in communications like this, we want to build portfolios customized for clients that reflect our best ideas for their portfolio at that time, and we want to have individual comprehensive reviews to help for see possible changes to the client’s situation. Hopefully this communication along with the other actions can lead to better results for us all.

See you next time.

James Pope

 

Please remember to contact Diversified Investment Strategies, LLC dba Advisor.Investments, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that Diversified Investment Strategies, LLC DBA Advisor.Investments to effect any specific transactions for your account.  A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available upon request.

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Diversified Investment Strategies, LLC dba Advisor.Investments), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Diversified Investment Strategies, LLC dba Advisor.Investments.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Diversified Investment Strategies, LLC DBA Advisor.Investments is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  If you are a Diversified Investment Strategies, LLC dba Advisor. Investments client, please remember to contact Diversified Investment Strategies, LLC dba Advisor.Investments, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Diversified Investment Strategies, LLC dba Advisor.Investments current written disclosure statement discussing our advisory services and fees is available upon request.

 

Advisory Services through Advisor.Investments • A doing business as name of Diversified Investment Strategies, LLC, an SEC Registered Investment Advisor • Insurance Services through Advisor.Investments

Main Office and Mailing Address:  11939 Bricksome Avenue, Baton Rouge, LA 70816

Voice: (225) 292-0687 ~ Fax: (225)292-0006 ~ Toll Free: (866) 748-0687