We believe that the two most important analytics for any investment decision are fundamental value and market trends.
Fundamental value determines the long term investment potential but can be a poor indicator of price movements in the short term. Market trends (including momentum and overbought/oversold signals) are often leading indicators of future price movements but it is dangerous to use them in isolation without taking into account fundamental value. It is logical to select investments which have the most attractive combination of market trends and fundamental value. Systematic and constant screening of these analytics for all assets provides an objective navigational tool for global investment decision-making which avoids using opinion, forecasts and emotion.
Fundamental value for equities is based on the discounted cash flow of dividends and a proportion of cash earnings. It can be applied to markets, regions, sectors and stocks to provide a fair basis for comparisons. Bond value is the gross redemption yield in real terms, and currencies are valued in relation to purchasing power parity.
Process - The Enigma Investment Radar
The “Enigma Investment Radar” is a proprietary investment methodology which recalculates the fundamental values of thousands of assets on a daily basis (equities as an asset class, equity regions, sectors, industries, 5000 stocks and currencies). Price trends, momentum and overbought/oversold indicators for these assets are also analysed daily. These are combined to generate an overall daily Investment Score for each asset which measures the extent of the opportunity or risk.
The Enigma Investment Radar then combines the Investment Scores for different assets using a disciplined rules-based approach to generate a number of equity-only and multi-asset Model Portfolios. These are updated daily and are subject to a turnover control.
The Investment ideas and Model Portfolios can be used by clients as a framework for implementing their own portfolios, using their own choice of stocks and funds. Alternatively, we can advise on the selection of Exchange Traded Funds to implement our Model Portfolios.
We manage the TB Enigma Dynamic Growth Fund which is based on the Investment Scores and Model Portfolios generated by the Enigma Investment Radar.