Achieving consistently high returns remains a challenge for individual investors. The assumption has been that stock markets in developed countries like the United States are highly efficient and finding opportunities to deliver alpha is difficult. But we don’t agree. We think reports of the efficiency of the U.S. stock market are highly exaggerated.
In our view, there are often significant dislocations between stocks’ price and their underlying worth. The Emles Alpha Opportunities ETF (EOPS), which can take both long and short positions, aims to capitalize on these price dislocations that other investors overlook.
The fund invests in value stocks of North American companies. It focuses on the small- and mid-cap universe, where it can be easier to find mispriced stocks because the breadth of coverage by investment industry analysts is not as extensive as it is for large-cap stocks. As we move through market cycles, a focus on active management and fundamental research can help EOPS find opportunities for those excess returns – or “alpha" - in both bear and bull markets.
Breaking from the herd
Wall Street consensus is often wrong. We believe in reversion to the mean and look for opportunities among deep-value stocks that we think have the opportunity to deliver a significant surprise. We focus on firms that are still leaders in their industry but that have fallen temporarily out of favor, and we believe we can consistently gauge inflection points when their stocks are poised for a rebound.
We look at cyclicals because we have deep expertise in judging where we are in the market cycle, and we think we can take advantage of other investors that misread the stage that the economy and markets are in. Reversion to the mean applies to sectors, as well as individual securities.
“New economy” stocks in sectors like technology, telecommunications and biotech, get a lot of research coverage. But we think “old economy” stocks in sectors like industrials, consumer discretionary and materials, are getting overlooked, and are poorly understood by the market. We believe our experience with these sectors enables us to uncover opportunities where the market is wrong about the prospects for companies and sectors.
The advantage of being able to take long and short positions is that we can make investments and has the potential to realize gains when the pendulum swings too far in either direction. We can move against the consensus either when the herd seems too pessimistic about a company or when euphoria sets in.
Aiming to maximize return and preserve capital
The Emles Alpha Opportunities ETF (EOPS) seeks to be an effective portfolio option for investors looking to enhance their total long-term capital appreciation and preserve capital in more challenging markets.
While the Emles Alpha Opportunities ETF is a new portfolio, the team has decades of experience implementing this strategy for hedge funds and family offices.
Find out more about how this innovative hedge fund strategy combines the advantages of active security selection with the liquidity and transparency benefits of the ETF wrapper by scheduling a call with our team.
Tags: Capital Preservation, ETF, Growth, Hedge Fund Strategy