Drivers and Stock Pickers

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Dear fellow investors,

In studies, 90% of drivers think they are above average. We believe that 100% of the people who pick stocks for a living think they will be above average. Is being above average a worthy goal and is the generation of alpha or excess return something to strive for?

Alpha is defined as:

“Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return or other benchmark over some period. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.”

We are the managers of a concentrated 25-30 stock portfolio purchased based on our eight criteria for common stock selection. What are the demonstrable sources of alpha to all stock picking organizations? Where does alpha come from in our discipline? What are the opportunities currently in the marketplace for alpha?

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