Over the coming weeks and months and in the run up to the launch of the Pynk Investor wallet (coming Nov) - you will start to hear more from the Pynk Team on our approach to investing, right here in the community.
By using our Crowd Wisdom system, we are harvesting pockets of financial, economic and even geo-political wisdom from our global Crowd - and using the data to feed into the decision making process of our Investment Committee.
The very best of our Crowd are in this community and that’s why we want to start here with as much information as we can.
Read on to find out more about what is coming soon…
Pynk’s approach to Investing
As we start to explain more about the forthcoming Investor Wallet, you will see how we are taking a different approach from the majority of retail investment products out there - one that takes into account the global macro economic situation we find ourselves in today, and one that takes a ‘Thesis’ approach to investing. Hence the launch of our first investment product will be called the Thesis Portfolio.
For those not familiar with the term it is an approach to investing that first looks to understand the reason and market conditions that make for a sound long term investment opportunity, across individual asset classes or a group of assets. This is an approach the Pynk Investment Committee are taking when deciding where to deploy capital, and a series of such theses allows for a fully diversified portfolio structured in such a way as to realise healthy returns over the long term. Unlike the majority of retail investment products on the market today, Thesis Investing returns are less correlated and are about taking a longer term view.
Within the Thesis Portfolio - the Pynk Investment Committee combines multiple investment disciplines, including Growth Investing, Macro Investing, AI powered trading as well as well as Value Investing. We harvest feedback from the Crowd and AI to varying degrees to find investment insight across these disciplines, or as we say Wisdom in the Crowd (™). Furthermore, we collect and process both fundamental insights and quantitative data and so we are creating a ‘Quantimental’ approach to investing.
Over the next few weeks we are going to delve a little deeper into ‘Value Investing’ and how to make an assessment of a company’s underlying or intrinsic value by looking at financial metrics such as P/E, PEG, EV/S, P/S ratios. When volatile markets overreact to news, it presents opportunities for value investors to get in at a price that does not reflect the longer term view. Warren Buffet and Charlie Monger are value investors of course, and the approach requires an emphasis on detailed business and strategic analysis.
Broadly speaking, if the market is confident of the Earnings (E) being achieved (for example, because of forecast upgrades, how popular the products are, how defensible the E are etc.) - it will assign a higher price to it. It doesn’t always do this quickly and therein lies the opportunity of critiquing the earnings assumptions as an investor.
To muddy the waters, the market will also assign a higher price to an E situation it deems as scarce. A clear example we have been discussing recently is Innovative industrial Properties (IIPR). The market wrongly assumed that it was just another cannabis stock exposed to the same supply/demand vagaries as the companies producing the product. But anyone who bothered could have seen that their E was pretty well insulated to a variety of even quite extreme short term pressures.
Younger companies at earlier stages of development often don’t have long track records for the markets to establish any kind of range/quality judgement regarding their earnings.
But the same sort of analysis is key to determine the attractiveness of its value: likelihood of achieving the plan, certainty of growth prospects under a number of scenarios and how defensible (e.g. barriers to entry) their market position and therefore potential earnings are. It’s again complicated further by the fact that the level of E is basically a choice for companies who can reinvest heavily if they grow. For example, Amazon could have been profitable ten years earlier had they ‘stood still’ and not expanded so aggressively their product/geographical offering. While ratios such as EV/S weed out the highly leveraged, and P/S is certainly useful for companies at this stage - it often pays to look harder at these companies.
In a world where ‘growth’ stocks have had a good run in recent years - it’s our belief that this discipline is undervalued by investors across the board. Value investing has a longer, better record historically (as demonstrated by the below chart) and is again indicating high potential:
Finding Wisdom in the Crowd
We believe our Global Crowd are well placed to give us unique insight into the Investment Theses we are working on. Thanks to the internet and democratisation of financial information - there is no reason why we, as everyday investors, cannot come to the same level of insight as professional analysts.
Stay tuned for more information on how to approach value investing as an everyday investor.
In the meantime, please share any comments / initial thoughts below.
Disclaimer: this information does not constitute any form of advice or recommendation by Crowdsense Ltd. and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.