Investment Process

Once our algorithm detects a potential behavioral mispricing, our research process is used to distinguish actual mispricing from market efficiency. Identifying the investment’s critical factors—and how the market has formed beliefs about those factors—is fundamental to this process.

Our investment process summarized

Proprietary search algorithm deployed to identify potential behavioral mispricing

We utilize a quantitative approach—an effort we have internally developed and continued to improve over the past six years—to identify behavioral-mispriced securities every day among 4,000+ U.S. publicly traded equity securities.

Quantitative and qualitative methods used to distinguish actual mispricing from market efficiency

This step of our investment process is an act of removal. We attempt to identify and effectively separate true behavioral mispricing from ideas that are more likely the result of data provider errors, data anomalies, or market efficiency. This part of our process creates a feedback loop that allows us to monitor and improve our algorithm continually.

Rigorous buy and sell discipline from our proprietary behavioral models to guide our actions

This is the last step of our process, where we select the stocks for the portfolio. While individually researched positions outside our behavioral strategy can have larger weightings, our behavioral portfolio is typically equal-weighted across the ideas that make it through this process, providing our investors with unique exposure to the opportunities created by potential human misjudgment and overreaction.