L&S Advisor’s investment process is rigorous, data-driven, and grounded in an unemotional buy-and-sell discipline. It’s an uncompromising, unbiased approach designed to precisely balance opportunity and risk.
Research & Data Tracking
The L&S investment process is based on extensive ongoing economic research and risk tracking. Drawing from a wide range of top-tier financial databases and industry sources, we gather data on the domestic and foreign economies, commodities, the credit markets, and the equity and equity derivatives markets. Then we distill our research into a dynamic, real-time index of over 100 raw data points which we continuously monitor and track.
Proprietary Quantitative Risk Analysis
Using our own expert insights to filter through the noise, we focus in on 30-40 data points which we believe to be the most important current indicators of risk. Then we perform our proprietary quantitative analysis on each of these data points. The goal is to understand and anticipate the movements of stock and commodity prices, interest rates, and business cycles, so we can better manage risk. Upon completion of our analysis, each data point is transformed into a global economic indicator which shows either an elevated, lowered, or neutral level of risk.
Long/Cash Asset Allocation
We make tactical asset allocation decisions according to our measurement of overall market risk. When our qualitative analysis of global risk indicators signals that the potential for loss is high, we will look to increase our allocation to cash cash in order to preserve capital. When our analysis indicates that risk is low, we move assets back into equities. It’s an agile process that can be adjusted at any time in response to market movements and anticipated trends.
Cycle-Based Sector Allocation
When it comes to our equity investments, we follow a “go anywhere” approach that allows us to pursue what we believe are the best opportunities available without constraints on style or market capitalization. We start by applying our macroeconomic research to determine the present stage of the economic cycle: expanding, slowing, declining, or recovering. Then we identify the market sectors we believe are favored by the investment environment, and the sectors we believe are at risk. We aim to avoid market sectors with high potential for excessive volatility, return shortfalls, or capital loss.
Individual Security Selection
Upon completion of sector allocation, we seek to identify compelling individual investment opportunities within our targeted sectors and industries. We tap multiple sources of research, examining numerous fundamental factors for each potential investment, including balance sheet strength, earnings growth, yield, valuation, management expertise, and franchise value. Our goal within each industry is to identify low-risk value stocks that we believe have the potential to generate returns superior to those of the industry as a whole.
Monitoring & Tactical Adjustments
We continue to monitor and review portfolio holdings and exposures, always looking for ways to improve risk-adjusted returns. Among our many safeguards is a rigorous, unemotional sell discipline. When we perceive rising indicators of overall market risk, we sell off equities and move to cash. Our stringent, risk-based sell discipline also applies to individual sectors and stocks. Whether at the asset, sector, or company level, we stand ready to make tactical adjustments at any time in an effort to preserve capital and manage risk.