Whether a tops-down or bottoms-up investor in bonds, stocks, or private equity, the standard analysis tends to judge an investor or his firm on the basis of how the bullish or bearish aspects of the cycle were managed.
Sentiment: NEGATIVE
Both from the standpoint of stocks and bonds, an investor wants to go where the growth is.
Good analysis is very useful when you want to convert a political decision into an investment. It can also go the other way and drive policy.
The chief problem with the individual investor: He or she typically buys when the market is high and thinks it's going to go up, and sells when the market is low and thinks it's going to go down.
When you're an investor, you can look at the quantitative and qualitative elements of an investment, but there's a third aspect: What you feel in your gut.
Any time you speak to people about their posture, you learn about their most recent investment activity. When someone just bought stocks, they tend to be bullish; someone who just sold is bearish.
What we do is we test what works on Wall Street. And sometimes it is earnings momentum, and sometimes it's earnings surprises. Sometimes it's price-to-sales cash flow, and then we put together our stock selection models.
What the investment community does like is short-term measures designed to boost share prices.
Approaches to determining stock values vary, but fundamentally, each company judging itself undervalued is saying that its future stream of earnings justifies a higher price than the stock market is willing to accord it.
If you are going to be a great investor, you have to fit the style to who you are.
There's a tendency to look at investments in isolation. Investors focus on the risk of individual securities.