Value Evidence

Documenting with hard evidence the edge we offer to active portfolio managers.

Price trends exposure is the driver of performance. Acknowledging and respecting trends is the essence of successful investing. Dismissing the importance of “validating and discriminating“ medium term trends across any chosen investment universe is the main reason behind the underperformance of many funds (SPIVA statistics).
Trendrating founders have expertise in developing models that dates back to the ‘90s. We offer a unique methodology to “rate“ the direction and quality of medium-term price trends, using a multi-factor pattern recognition algorithm, that is self-adjusted to volatility changes.
Our trend discovery model provides a rating metric to discriminate bull vs. bear trends and to spot in time trend reversals across stocks with reasonable accuracy, as extensively documented here . Investors can spot new risks and opportunities by monitoring the downgrades and upgrades across 17,000 stocks, 3,600 ETFs and 330 indices. This additional market intelligence is a powerful complement to most investment strategies and fills a critical gap – the difficulty to objectively measure the true direction and quality of individual trends, filtering out all the noise. We serve 200+ premier institutions on a global scale and our rating analytics have been selected by partners like Bloomberg and Euronext.
Bull trends are identified by a positive rating (A and B). Bear phases are captured by a negative rating (C and D). Upgrades and downgrades signal trend reversals and are notified via alerts.
Here we document in different ways the accuracy of our rating model to prove the advantage that can be extracted profiting from the performance dispersion in the market.

Market Facts

The Performance Dispersion across stocks offers great opportunities for active managers.

The ability to capture some of the top performers and to avoid most of the bottom performers in whatever investment universe is selected can obviously improve the performance and the risks control.

Our advanced analytics offer a mission-critical edge, as A and B rated stocks outperform C and D rated securities with good consistency across different investment universes. This provides a new level of market intelligence to maximize the performance of any investment strategy.

Evidence 1

12 years comparative analysis of the intrinsic edge of our model. We analyze the return of all the stocks rated A and B vs. those rated C and D We use the universe of the 500 largest cap stocks in US and in Europe. We build a US “winners“ and a European “winners” portfolio selecting at any time all the stocks rated A or B, readjusting in case the selection at the end of each month in order to have only securities with a positive rating. We perform the same process selecting only stocks rated C or D and create a US “losers” and a European “losers” portfolio. We then compare the performance of the two portfolios for both markets. We want to prove that stocks rated A and B tend to outperform those rated C and D in a consistent way. Charts below:

Jan 2010 – Jan 2022	A/B rated stocks strategy	C/D rated stocks strategy	Difference
Annualized Average Return	+11.98%	+4.41%	+7.57%

Jan 2010 – Jan 2022	A/B rated stocks strategy	C/D rated stocks strategy	Difference
Annualized Average Return	+9.89%	+0.12%	+9.77%

Evidence 2

Last 6 months average return of positive vs. negative ratings

An up-to-date report analyzing the average return of the A/B rated stocks vs. the C/D rated ones, for the last 6 months (March 1st 2022 to September 1st 2022) in the broad market (US and EU). The additional table presents the 10 best and worst performers, and the performance since rated.

US large and mid cap stocks: