Fact-Based Investing


Here are three major characteristics of Fact-Based Investing:

  •  First, and most importantly, there are no predictions in Fact-Based Investing.  We go by ‘what is’, and not from the prediction-oriented ‘what might be.’


  • Second, Fact-Based Investing makes no assumptions about Market ‘efficiency’ or rationality.  Fact-Based Investing embraces the reality of inefficient, irrational Markets, and tries to use those characteristics to our advantage.
  • Third, Fact-Based Investing does not remain fully-invested regardless of Bear Market circumstances.


We zero in on measurements that reflect the continuous tug-of-war between supply and demand. We believe that every single tick in the market - and every trend - results from imbalances in supply and demand. After all, if there were no imbalance of supply and demand, prices wouldn't budge at all!  And longer-running trends are, in our view, are driven by longer-term imbalances in supply and demand.


Our implementation of a Fact-Based Strategy requires just two kinds of tools:

  • Tools to identify Bull and Bear trends; and
  • Tools to identify high-performance portfolio  candidates.

Here is our primary tool for identifying major trends, called the Bull-Bear Indicator:

The job of the Bull-Bear Indicator is to determine when a new Bull Market or a new Bear Market has emerged. Once again, this is a measurement of ‘what is’, with no predictions or academic theories involved.
Our goal is to be defensive and protected in Bear Markets, and to be fully-invested during Bull Markets.


The second tool of our Fact-Based Strategy seeks to identify high-performance portfolio candidates:

Momentum, relative strength, rate-of-change, nearness-to-52-week-highs, and other measurements of performance characteristics, are all combined to produce rankings of portfolio candidates.


High-performers are selected, low-performers are discarded, and the whole process is repeated at regular intervals, usually quarterly. This process of continuous self-renewal is intended to capture the benefits of long-term winners, without being dragged-down by the unnecessary inclusion of under-performers!


Combining these two tools gives us a simple-yet-complete strategy, providing guidance on when to be defensive and when to be offensive and, when we are offensive, how to construct high-performance portfolios.


Fact-Based Investing, concentrating on the ‘what is’ of Market supply and demand, rejects the ‘what might be’ of Prediction-Based Investing and the ‘what ought to be’ of Theory-Based Investing.


By combining trend identification and high-performance portfolio selection, our Fact-Based Investing strategy gives us what we believe to be the best chance of achieving our twin goals:

  • To prosper in Bull Markets, and
  • To be protected in Bear Markets



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