How we invest
Our Process – How We Invest
We are active investors and traders. We find opportunities to not only maximize portfolio returns but also mitigate the risks associated with constantly shifting markets. We do not simply buy into a mutual fund or etf based portfolio strategy and hold it over the long-term. We are “swing” traders looking for opportunities aiming to hit a target percentage return over time frames as short as 1-week to as long as two years. We will and do hold some key stocks for the long term, but we are married to none.
Risk Management:
We tackle risk in four approaches. 1) Size of position, 2) Setting a stop-loss on the swing trade, 3) Taking gains and rebalancing, and 4) having the appropriate asset allocation to reflect your risk tolerance.
Size of Position
Beta is a measure of volatility in a portfolio; specifically, the volatility of an individual stock compared to the whole of the market. High beta stocks in sectors like technology, small and medium size companies offer higher growth relative to the market but also higher risk. Having a balance between high and low beta stocks can add both growth and income to a well-balanced portfolio as well as a hedge in volatile markets. We do not have to be right all the time, we just need to be bigger when we are.
Stop-Loss
Generally used in reference to a trade or order type but we use it for setting zones of support in swing trades. If a stock has formed a recognizable trading pattern it will generally have both support (bottom) and resistance (top) within a range. Most often, it’s beneficial to sell if a stock breaks its support. When stock’s break support on weekly and daily charts, they often exhibit much further downside. On the other hand, if a stock breaks through resistance, it could very well establish a new pattern leading to larger gains over the short term. This is break out trading, buying stocks on breakouts of resistance.
Taking Gains and Rebalancing
It’s a simple philosophy, but if you are not taking gains, you are not booking a profit. We do not have to sell the entire position, but trimming the position and bringing it back to the appropriate allocation is key to long term success. Rebalancing portfolios over time helps to keep your portfolio aligned with your risk tolerance. This is done as needed after and before big moves in markets.
Asset Allocation
the one most of you are likely familiar with is Asset Allocation. After determining a client’s risk tolerance, we will first start with the appropriate balance between stocks, bonds, commodities, alternatives and cash. This might be what is referred to as 60/40, 70/30, etc… It’s also important to note that sometimes it’s appropriate to move to the sidelines and wait out the volatility. We have demonstrated this successfully during selloffs in 2020 and 2022.
Evaluation Process:
Global Economic Analysis:
- Begin by analyzing the world economy, including global trade patterns, demographics, GDP, inflation, and broader geopolitical climates.
- Understanding these macroeconomic factors helps us gauge the overall health of the global economy and identify potential trends that may impact various sectors and markets.
Country-Specific Opportunities:
- Next, we evaluate country-specific opportunities, recognizing that profitable investments may include US stocks with significant international exposure.
- Assessing where a specific country stands within its economic cycle guides us in identifying sectors that may perform well during different phases of expansion, peaking, contraction, and recovery.
Sector Preference Based on Economic Cycle:
- Determine which sectors are likely to thrive or underperform based on the current economic cycle of each country.
- Certain sectors tend to perform better during specific phases of the economic cycle, and understanding these dynamics helps us focus on sectors with growth potential.
Fundamental Analysis of Individual Stocks:
- Conduct fundamental analysis of individual stocks to identify the best investment opportunities within their respective sectors.
- Evaluate the company’s income statement, balance sheet, and statement of cash flows to gain insights into its financial health, profitability, and growth prospects.
Technical Analysis for Timing and Patterns:
- Employ technical analysis by charting past movements of selected stocks to identify patterns and trends.
- Technical analysis helps us assess market sentiment, identify support and resistance levels, and anticipate potential price movements.
Continuous Evaluation and Monitoring:
- Engage in continuous evaluation and monitoring of the financial markets on a daily, weekly, and monthly basis.
- This ongoing process ensures that we stay informed about market developments, adjust our investment strategies accordingly, and capitalize on emerging opportunities.
Active Portfolio Management:
- Our portfolio managers are actively trading and monitoring financial markets during trading hours.
- We prioritize managing portfolios efficiently and effectively, dedicating our time to analyzing market trends and making informed investment decisions rather than pursuing client prospecting activities.
Referral-Based Business Model:
- Agape operates as a referral-based business, relying on satisfied clients to refer new clients to us.
- Our focus is on delivering exceptional service and results to our existing clients, fostering long-term relationships built on trust and satisfaction.
Discretion:
Because markets can move so fast, discretion is key for a portfolio manager to operate efficiently. Instead of being on the phone calling clients to seek permission to place a trade, we operate on our Fiduciary responsibility of putting positions in client portfolios we believe are best suited to achieve their goals. We love to discuss a client’s portfolio with them, where we have been and where we are likely to go at least semiannually. We are always available to visit regardless of appointment.