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alpha-DNA: July 2019 Monthly Update

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Earnings Season

Earnings season is more than 90% complete for the broader markets and, likewise, for the companies we own in our long portfolio. So far, we are on track to achieve 80%+ success rates on our EPS & Revenue projections. This would be the 8th straight quarter with that level of success. And so far, we have had more than 2 companies report positive guidance for every firm that has reported negative forward guidance.

July performance

July was a solid month for our long portfolio in our long/short and in the long-only strategies. The S&P stocks in the CUSE strategy were the only exception. The returns are posted below. The hedge fund long/short achieved over +2% returns which was more than the market.

Much of the solid gains were driven by earnings success and earning’s beats. This is the first quarter since mid-2018 that we have seen earning surprises rewarded in-line with historical surprise rewards.

August market sell off

We saw August start with a sharp sell-off in equities but the market has tried to find it’s footing a little bit over the last couple of days. Our signals are flashing warning signs for sure. We are seeing strong companies hold up relatively better and the weakest digital firms have been punished. This is generally a bearish sign.

On the back of those signs, we strengthened the potential for the Put hedges in our hedge fund and in the Equity/Long Short SMAs.  Through last Friday (8/16/19), the hedge fund was still above where it finished the month of June while the S&P 500 and Russell 3000 could not boast the same outcome. The hedges have helped to dampen the impact of the August declines.


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