🌀Hurricane Season = Alpha Season📈

Alpha in the Hurricanes?

In the multi-manager world where fundamental investors trade on shorter time frames - quarterly or monthly and sometimes even weekly - the game has really become about figuring things out faster than the other person with just enough conviction to “pull the trigger”. The goal is to get to the answer with 60-70% conviction before everybody else.

It’s hurricane season, meaning some PMs may reposition their portfolios, especially with earnings season fast approaching.

For value-oriented investors like Warren Buffett, such short-term events have no bearing on their investment process, and they lose no sleep over them. They aren’t focused on short-term alpha opportunities but rather on long-term accrued fundamental value. For almost every other fundamental investor, however, such events matter. Even Tiger Cubs closely monitor them, especially if any inflections in the numbers can go beyond the quarter and change the whole year (more on this at phoenixlearning.io).

Needless to say, for pod shops, events like hurricanes are critical. Fundamental long/short portfolio managers turn their books ~10-16 times a year. They focus on shorter holding periods with a big emphasis on company-specific catalysts.