This is what drives stock prices in the short-term!

The best Portfolio Managers leverage flows in incredible ways.

In the long-term, stock prices follow earnings per share (EPS). You will see many great investors say this, and evidence shows it’s generally true.

But what drives stock prices in the short-term? Short-time meaning intraday to a few weeks or months.

Flows.

I will be honest with you - the first time I heard this from a PM, I was quite confused as to what he meant. I’m surprised this just isn’t talked about enough. The most skilled PMs use flows for alpha generation, positioning, risk management, timing and execution.

You will want to read this.

And no. Tracking and understanding flows and using them in your investment process doesn’t mean you are chasing factors like momentum. You can be a market-neutral fundamental investor and still leverage flows in your investment process. Flows can dictate your timing. This is a really, really important point, and we will go over it.

Let’s get into it.