There are two basic kinds of securities analysis. Fundamental analysis seeks to identify what to buy, while technical analysis focuses on when to buy – and just as important, when to sell. Unfortunately, most analysts focus on one method or the other, in essence “playing the piano with only one hand.” Our aim is to effectively combine both. To do this, we employ point-and-figure charting and relative strength studies.
Point-and-figure charting is merely a logical, organized way of recording price movements – or supply and demand – and assessing the relative strength of one sector against another, as well as against the broader market. The system helps us to identify the strongest areas within the market and the strongest investments within each area on an ongoing basis. Also, and perhaps more important and often overlooked, the methodology allows us to identify and avoid the weakest opportunities available. Armed with this information, we are able to build portfolios designed to harness the momentum of major trends and adapt quickly as momentum shifts.
We call our approach to portfolio construction “adaptive indexing.” We take strategic action when market conditions warrant a change in a portfolio’s position or holdings. Sometimes those tactics are defensive and other times they become more aggressive, but we always act with our clients’ goals and individual risk tolerances at the forefront.