Traditional financial advisors will typically invest your assets in passive index ETFs, or near-passive funds that hold 100s of stocks, where these investments generally mirror the broad market.  The advisor will typically re-balance the portfolio once or twice yearly.  This investment approach is referred to as “buying the market”, because whatever the market does, your portfolio will do the same; at least for the portion that is allocated to equities.  When the market is in a confirmed UP trend, most traditional financial advisors will make positive returns for your portfolio.  It’s pretty easy to make positive returns when all boats are rising.  However, when the market starts to trade sideways and choppy, which is usually the case 6 to 8 months out of the year, or if the market moves into a long-term down trend, your portfolio will most likely follow the broad market and post negative returns.  If the market crashes like it did in March 2020 from COVID, your portfolio of passive investments will typically decline by an equal magnitude, which is usually very painful to most investors when it’s happening. In contrast, QTR Capital focuses on the development, optimization and management of quantamental, long/short, actively managed investment strategies. Our strategies are managed by experienced portfolio managers.  We follow well defined exit rules that is effective in preserving capital, locking in a high percentage of investment gains, and reducing portfolio draw-down during corrections or crashes. Below are some reasons to consider allocating a certain percentage of your assets to actively managed strategies that follow well-defined exit rules: 1) The returns of passive indices (e.g. the S&P500 large-cap, NASDAQ Composite, and Russell 2000 small-cap indices) and near-passive funds that hold 100’s of stocks will generally mirror the broad market.  If the broad market (a proxy for the broad market is the S&P500 index) rallies 10%, your portfolio will most likely increase 7% to 10%. Alternatively, if the broad market crashes by -35%, your portfolio will most likely decline by -30% to -40%.  Because there is no active management closing individual positions that are triggering exits, your portfolio will decline approximately the same magnitude of the correction or crash.  By following a passive strategy of  “buying the market”, it relies on the assumption that the market will rebound after a crash.  Recently, investors are convinced that the market will always rebound after corrections and crashes. However, sometimes the market won’t rebound quickly and investors can get hit with large losses.  Case in point, after the crash in 2008 it took five years for the market to fully recover, and many investors couldn’t hold on for the duration and ended up losing 40% to 50% of their hard earned money.  After the 1929 crash, it took 20 years for the market to recover and all investors lost 90% of their money.  The market doesn’t always rebound after corrections or crashes, and we need to keep this in mind as we decide on what strategies to invest in and how the investment is managed to preserve capital. 2) Passive Indexes comprise all stocks, the good, the bad and the ugly;  basically, all stocks that fall into the specific category of the index.  This usually means that the investment is “just average”.  Actively managed equity funds stock-pick and identify the fastest growing companies with the best technicals and fundamentals.  When these fast growing companies breakout and start to trend upward, they tend to outperform the broad market. 3) A typical investment that traditional financial advisors will put client’s money into are near-passive funds that hold 100’s of stocks.  The fund managers that run these near-passive funds are usually very slow to exit positions.  When the market starts to pull back, these fund managers will hold most positions as they fall in value and draw-down your portfolio.  Thus, the max draw-down of a passive index or near-passive fund will usually be higher than the draw-down experienced by an actively managed strategy.  Please refer to the max draw-down metric in the fact sheets for each of our strategies, and how they compare to the benchmark indexes.  The max draw-down of an actively managed QTR Capital strategy is about 40% less severe than what is experienced by a passive index or fund.  QTR Capital portfolio managers follow well-defined exit rules and are continuously pruning positions that are not performing, or are triggering exits.  This allows the portfolio manager to preserve capital and retain a large percentage of the investment gains during periods of high volatility. 4) Finally, most traditional financial advisors will hold your portfolio of passive indexes, ETFs and funds right through the next recession.  They will just say “let’s hold on as the market will eventually come back”.  We know how this played out in 2008 when most portfolios lost -40% or more of their value.  This approach didn’t work in 1929.  For the investors that put all of their money into stocks and “held on because we know it’s going to come back”, it took 20 years for the market to come back, and these investors lost all of their money. One option to consider is to add an “actively managed” component to your portfolio.  In this scenario, you would redirect a percentage of your assets to QTR Capital and have our team manage this portion with one of our actively managed strategies. QTR Capital is a Registered Investment Advisor firm (RIA). Because some financial advisors understand that they are not well trained or experienced in active portfolio management, some will outsource the investment management task to 3rd party investment managers, like QTR Capital.  In this case, the 3rd party investment manager is classified as a sub-advisor.  This is a positive for the client.  However, the negative is that the client will potentially pay higher fees because the advisor and sub-advisor split the quarterly fees paid by the client.  Therefore, it’s usually best for the client to work with the investment fund provider, like QTR Capital, directly. For the financial advisors that manage the assets themselves, they will usually just “buy the market”, as mentioned above, which is not optimum for the client. This means that most advisors will allocate the client’s portfolio across a blend of large-cap ETFs, mid-cap or small-cap ETFs, possibly an emerging market ETF, and typically some bond ETFs.  Many times the chart of one of these investments, to the trained eye of an active portfolio manager, will say “don’t enter this ETF until it breaks above a certain level”; or, “get out of this position if it closes below this level”.  Also, macro-level timing indicators might be flashing “yellow” telling the experienced portfolio manager to start reducing exposure by trimming some positions.  Unfortunately, most traditional financial advisors don’t understand this and will still put you into these investments, regardless of what the charts or macro-level timing indicators are telling the trained portfolio manager. Moreover, traditional financial advisors will be slow to get you out of an investment, if ever, when they should be selling and going to cash. Because most traditional financial advisors are not trained portfolio managers and don’t have strong technical skills, they will be slow to react to any sell signals that a stock, index or ETF may be exhibiting Overall, we believe that it is best to allocate at least a portion of your assets to actively managed strategies run by experienced portfolio managers.  Because we are active managers that are expert technicians, who also monitor macro-level market-timing indicators, we know when certain investments are flashing “yellow” or “red”, and we know how to get out of positions quickly when sell-signals are triggered, which is key to retaining a large percentage of investment gains, and to overall preserve capital.

QTR Capital Management portfolio managers are trained to move quickly and be decisive when closing out positions when our proprietary exit rules trigger.  The QTR Capital team has spent many years developing proprietary entry and exit rules where these rules do a good job of allowing our investment strategies to beat the broad benchmark indices, and to protect capital when the market corrects or crashes.  Adhering to well-defined exit rules is the key to protecting capital and investment gains over the long run. In contrast, most traditional financial advisors will just “hold” through down markets, or move very slowly in cutting positions.  Moreover, they will hold most portfolios right through the next recession where a portfolio will typically lose -40% to -50% of its value during a recession. When the market gets volatile, or if a position starts to roll over, the traditional financial advisor will usually just say, “let’s hold on because the market (or stock) will eventually come back”.  Unfortunately, we know what happened in 2008 where most portfolios were down -45%, and it took 5 years for the market to fully recover. Our philosophy is that “cash is a position” and it’s okay to take a certain percentage of the portfolio to cash if the market is behaving badly and individual positions are triggering to exit via our proprietary exit signals.  We’ll also allocate up to 25% of the portfolio to options based hedges, when appropriate, to help reduce portfolio volatility and draw-down. If the market starts to become unhealthy where the probability is increasing that we’ll have a correction or crash, we can many times see it several weeks in advance through our robust analysis and through the price action of the 130 stocks that reside in our portfolios.  We also monitor the macros of the US economy via the major indices, bonds, economic data, and breadth, along with monitoring the economic data and market price action in Europe and Asia.  All of this data provides us visibility into “storms” that might be developing out at sea and are preparing to make landfall.  Our robust analysis allows us to many times see these storms brewing where we’ll able to cut some of our long exposure before the correction hits.

Below is a summary of how we are different: 1) Capital preservation is a top priority, thus all strategies are actively managed and follow strict entry rules and well-defined exit rules. 2) Our team performs robust macro market analysis each week that guides our investment decisions over a two to four week period. To view our weekly market analysis please go here. 3) At the company level we perform sophisticated analysis that blends technical, fundamental and factor-based quantitative analysis, also known as quantamental analysis. 4) For the long equity strategies, we focus on reasonably valued, fundamentally strong companies that have strong positive earnings growth, along with strong technicals; our equity strategies tap into accelerating upside momentum. 5) Our portfolio managers follow strict entry rules that open long positions at lower-risk entry points; this increases the probability that upside momentum will begin to accelerate and the trade will work. 6) Our portfolio managers follow well-defined exit rules that allow the winners to run, but able to exit positions fast enough to lock in a high percentage of gains and to preserve capital during periods of high volatility. 7) When appropriate, we open specialized, low-cost options-based hedges in our equity strategies, which reduces draw-down during market corrections or crashes.

When the market is in a confirmed, long-term UP trend it’s okay to allocate a certain % of one’s portfolio to an ETF like the SPY that tracks the S&P500 index. However, it’s strongly encouraged to have a good understanding of technical analysis so you can set exit levels to protect your capital; especially since the major indexes are classified as “expensive” as of June 2021. As we head into 2019 the market is going to become more difficult to navigate as the Federal Reserve continues to raise interest rates, and fiscal stimulus from the corporate tax cuts begin to wear off.  The Fed’s interest rate hikes will most likely slow the US economy to sub 2% growth by late 2019.  There is a moderate to high probability that the US economy will go into a recession in 2020, which will cut most portfolios by 40% to 50%.  Be aware that the stock market is forward looking so stocks will start to have a higher frequency of volatile trading and strong corrections up to 9 months prior to a recession, so portfolios can get hurt many months prior to the start of the actual recession. As we head into the second half of 2021, where the broad indices are deemed expensive and fully valued, it’s less optimum to just “buy the market” by holding broad indexes and ETFs.  Alternatively, it’s better to be a stock picker and focus on specific stocks within specific industries. That is, stock picking and nimble long/short strategies will most likely outperform the broad markets in 2019.  Moreover, well-defined exit rules are required to control downside risk and to preserve capital.  It’s never recommended to “just hold on because we think it’s going to come back”.  We know what happened in 2008 where most accounts lost 50% of their value.  Having well-defined exit rules and an understanding of where and how to execute the exits is imperative to locking in gains and preserving capital. As a general rule, traditional financial advisors are not trained portfolio manager, they are not trained to be nimble and fast moving, they don’t obey or really understand the concept of having well-defined exit rules, and most will tell you to “just hold on because it will eventually come back”.   We know what happened in 2008, where “just holding on” is usually not a good game plan. As of November 2018 it’s still okay to allocate a small % of one’s total investable cash to a broad-based index ETF like the SPY, because the stock market is still in a confirmed, long-term up-trend. However, the market is becoming more volatile and the indexes are not looking healthy.  It’s imperative to have an exit strategy for all holdings based on predetermined levels.  If you are not sure what these levels are please contact us and we can help you set exit rules for your current holdings. It’s also recommended to start reducing your holdings of passive indexes and ETFs and to either go to cash, or allocate some assets to actively managed long/short strategies that are managed by a nimble portfolio manager.  Portfolio managers within QTR Capital follow strict exit rules, are quick to move to cash when the technicals trigger exits, and dynamically allocate more to bearish trades when the charts and indicators warrant it.

Large hedge funds and automated investment bots continuously rotate large amounts of money across different industry sectors.  Typical sectors include industrials, energy, technology, health care, consumer staples, consumer discretionary, and transportation.  There are approximately 60 sectors that are significant.  There are actually 200 total sectors when looking at a detailed map of all sectors. When cash starts to flow into a sector, e.g. semiconductor companies, it will push up the stocks in this sector.  As cash is rotated in, stocks within the sector will trend upward typically for 3 to 6 weeks, and sometimes for many months. However, once these large funds decide to book profits and rotate into another sector, the stocks and ETFs will quickly drop. The Sector Rotation strategy takes advantage of this phenomenon of cash flowing from sector to sector, and follows the money.

We manage separately managed accounts for our clients through Tradier Brokerage.

Technical analysis is the study of price and volume changes over time. Technical analysis usually involves the use of financial charts to help study these changes. Any person who analyzes financial charts can be called a Technical Analyst. Despite being surrounded with data, charts, raw numbers, mathematical formulas, etc., technical analysts are really studying human behavior – specifically the behavior of crowds with respect to fear and greed. All of the investors that have an interest in a particular stock can be considered to be “the market” for that particular stock and the emotional state of those investors is what determines the price for that stock. If more investors feel the stock will rise, it probably will.  If more feel that the stock will fall, then it probably will fall.  Thus, a stock’s price change over time is the most accurate record of the emotional state – the fear and the greed – of the market for that stock and thus, technical analysis is, at its core, a study of crowd behavior. The reason technical analysis offers value is that directional price moves are often sustained for a period of time allowing analysts to detect and profit from the change in price. Even though a technical analyst has many math-based tools to analyze price and volume movement, the process is ultimately an art in the study of human behavior. All investors are faced with three basic questions with their investments. What to invest in, when to buy, and when to sell. Technical analysis provides a framework for investors to methodically select equities and pick times to buy and sell. Emotion, the investor’s nemesis, is greatly reduced in these decisions since the investor can develop a list of “what and when” rules to follow. Rather than “buying and hoping for the best”, technical analysts know how much risk they are taking when they open a position, they have an idea of the probability that the trade will work, and know when to exit a position. Only historical price and volume data is used for technical analysis, along with permutations of this data that create indicators that can be viewed on a chart in conjunction with the stock price data.  The premise of technical analysis is that all known information such as what a company does, its financial results, analyst’s ratings, management performance, politics, news, etc. are reflected in the historical price and volume data. It is important to understand that technical analysis can only be used to determine the likely direction of future prices. It cannot anticipate news events or how investors will respond to them. The graph above is a historical price chart for the company Analog Devices, Inc., ticker symbol ADI. The line represents the price of ADI over a period of a year. The price chart illustrates how prices can move up, down or sideways for months at a time. Technical analysis uses methodologies to help indicate when prices are beginning to change direction. The goal of a technical analyst is to buy an equity when the price chart indicates prices are beginning to move up, and then sell when the price chart indicates prices are beginning to move sideways or down. The example above illustrates the layout of a typical SharpChart of Microsoft Corp., symbol MSFT, courtesy of stockcharts.com.  This is a typical chart that a technical analyst would use. Price data, daily trading volume (the histogram), and technical indicators such as a 50 day simple moving average (SMA), and a 200 day SMA are displayed.  Moving averages such as the 50 day and 200 day SMA’s are usually drawn on the chart by a technical analyst because it provides valuable insight into price trend. The indicator shown below the price data pane is the MACD, which is a popular technical indicator.  A technical indicator is a mathematical expression of price and/or volume which can provide insight into future price movements. For more information on the MACD indicator, along with dozens of other popular indicators please visit stockcharts.com.   Source:  stockcharts.com

Quantamental is a word formed from the words “quantitative” and “fundamental”.  Quantamental refers to an investment methodology that combines the following: 1) Quantitative approaches that use factor-based statistical analysis;  2) Technical analysis that generates macro and stock-level entry and exit signals;  3) Fundamental methods that analyze the health of individual companies by examining sales & earnings growth, cash flow, profit margin, level of outstanding debt, return on equity, among others. In general, fundamental analysis tells us how healthy the company is; technical analysis tells us when to enter and exit a stock; quantitative analysis provides the probability that a stock will breakout and trend in the desired direction, and to what magnitude.

A long/short strategy simultaneously opens bullish and bearish trades.  Sometimes this type of strategy is called a market neutral strategy because it can make money in both directions.  For the majority of the QTR Capital strategies, we don’t short individual stocks.  However, we will open macro hedges through the purchase of index option puts, when appropriate, periodically allocating up to 15% of the portfolio to short positions that will help reduce draw-down in the case of a market correction or crash.

Factor-based, quantitative analysis (QA) is a methodology that seeks to understand and predict behavior by using mathematical and statistical modeling.  In the investment management industry, QA is used to analyze investment opportunities to provide predictions of when to purchase or sell securities, and the potential magnitude of a move.  The input factors, or independent variables, that are fed into a factor-based quantitative model include financial ratios such as price-earnings ratio (P/E), earnings growth, revenue growth, return on equity, profit margin, cash flow, among others.  

We perform robust market analysis each week to help guide our investments and trades over a two to four week period. We publish our weekly analysis every Sunday evening. At a macro-level, we analyze approximately 50 charts each week that represent macro-level technical, fundamental, breadth and sentiment data. This macro-level analysis helps us modulate our bullish and bearish exposure levels. At the micro-level, which identifies prospective stocks, we analyze hundreds of charts weekly for individual stocks and ETFs, and combine this technical information with fundamental and quantitative analysis. We’ve developed a proprietary 4-level scanner that leverages technical, fundamental and factor-based quantitative analysis to identify prospective stocks to buy or short, and to provide entry and exit triggers. To see our weekly market analysis please go here. To view an intro video that discusses the analysis that we perform and our 4-level scanner please go here. For more information on the analysis that we perform please go to Education -> Learning Center Macro & Technical Analysis