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Focus on Secular Trends
Since the 1980s, Dr. Stux and Mr. Bauer have worked in research and investing, and collaborated on specific equity and equity derivative investing strategies. Their experience led them to a shared belief that the secular component of price trends is driven by long-term, sustainable factors that may be reliably modeled.
Complementary Models: Top Down and Bottom Up
All Stux Capital investment portfolios are built using two distinct, proprietary alpha-generation models. Our Sector Rotation model harnesses predominantly top-down macroeconomic information to model a sector’s attractiveness versus the benchmark. Our Stock Selection model uses a broad array of bottom-up company fundamental information to model a stock’s attractiveness within its sector.
This breadth of factor inputs into the investing process tends to produce a portfolio that performs well in a variety of market environments.
Research Driven
The heart of our investment process is the research into what factors reliably affect stock prices. In order to build conviction in a factor and deploy it in our models, the investment team applies the best of quantitative and traditional fundamental methods.
We select factors based on:
- Evidence of historical, statistical relevance;
- A compelling economic justification; and
- Judgment honed from almost three decades of investing experience.
This triangulation approach is especially helpful in uncovering multivariate relationships that are more difficult to find, diffuse more slowly into stock prices, and generate more reliable alpha.
Balancing Return and Risk
Our portfolio construction process results in a final portfolio that maximizes alpha (the final score from our models) while balancing client return and risk targets, and portfolio turnover. Importantly, we employ a rules-based approach rather than risk-model based optimization to construct each client’s final portfolio.
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© 2011 Stux Capital Management
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