Our Quantamental Approach

Quantamental Investing

At Marathon Trends, we have a process driven approach to investing. Our process invests in fundamentally good stocks for the long term and we optimize our entry and exits based on quantitative studies. Our process combines the best from both worlds of fundamental and quantitative analysis. This process and style of investing is called Quantamentals - an investment strategy that combines a fundamental approach to investing with a quantitative overlay.

The real power is not in pure quantitative analysis or fundamental analysis but in a well- balanced combination of the two. We believe that this is where our expertise and true value lies. By blending factor-based and stock-specific research, our investors can benefit from the two engines to potentially generate excess returns — one that works at the market level and the other at the individual stock level. Different environments tend to favour different approaches. The advantage of two engines is that when one doesn’t work, the other one will. We believe that the alpha delivery over time is therefore likely to be more consistent. More consistency can lead to faster and smoother compounding journey.

This combination is often regarded as a meeting of man and machine: the investor harnesses the scale and the power of data and blends it with the benefits of human insight, in order to unearth winning investment bets.

Fundamentals:

Fundamental analysis is a way to measure value. Companies publish multiple data points to explain and highlight performance, plans, including future direction and growth strategies. We analyse the company’s growth pattern while measuring the performance of the sector and evaluating how the company will fare with the overall growth of the economy. Considering all these, we can look at growth prospects of the company and other metrics to gauge its value. Once the Growth and profitability are measured, market prices provide us with an entry route.

Quantitative:

There are hundreds of indicators and metrics that are available to analyse the patterns in the market, based on factors like movement of stock prices, volatility in price, buying and selling patterns, industry/sector movements and correlated stocks. Quantitative analysis uses such statistical data in the market to gauge how the stock prices may move and use these insights to develop an investment strategy. In short, quantitative looks at just the prices and volume and volatility to formulate investing strategies.

Quantamental investing, uses both of the above strategies to invest in companies. Active managers with $680 billion in assets under management (AUM) use a blend of quantitative and fundamental analysis, which is more than double that of a decade ago, according to data-analytics company eVestment in Atlanta.

Among high-profile investors, New York-based fund manager BlackRock, in 2017 announced it was moving $30 billion in assets to strategies that would rely on more computers and fewer humans.

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At Marathon Trends we believe that participating and profiting from trends requires the “belief, discipline and perseverance” of a marathon runner.

belief

A growing body of academic literature shows that a tiny fraction of listed stocks account for virtually all of the value created in the equity market. We believe the vast majority of companies simply don’t create wealth for their shareholders – from a long-term perspective. A trend investing approach recognises this and narrows down the investible universe considerably, to this set of companies which are likely to be the tiny fraction which create most wealth for investors by helping investors avoid losers and sharpen their focus on companies that are worthy Investment.

We believe investing is not about riding short-lived hype, quitting at the right time and then hopping on the next hot topic. Our goal is to identify long-term opportunities and to capitalize on these. Megatrends are comprehensive changes that have the potential to influence society, the economy, and our lives over the next 3-5 years.

discpline

Participating in these trends may seem easy in retrospect, however, it is very challenging as high levels of discipline are required. To be disciplined, it requires a very robust model based on a well-defined process in which the investor needs a strong belief.

At Marathon Trends, after years of experiencing the twists and turns of Indian markets and having had the opportunity to work with the best in the industry, we have arrived at an extremely robust model, which aims to create consistent compounded returns for investors with low drawdowns. We believe in the power of compounding for wealth creation, however, low drawdowns in the portfolio are equally important to survive this long journey to gain superior returns.

perseverance

However good the model maybe, markets dictate a journey of their own with numerous ups and downs. To survive and emerge stronger from these ups and downs there is a need for strong processes. A process that is well defined, well tested and simple enough to practically follow. Ultimately, persevering with your process in difficult times is the hallmark of all successful investors. The best investors will go through difficult times but sticking to the process is what brings them out of drawdowns. Following a strong process in difficult times is what separates the successful investor from an unsuccessful investor.

Trend investing is highly profitable. However, it must be done with an appropriate process and immense discipline.

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