July 22, 2019—Netflix Stock Drops -10% As Growth Slows. Are Netflix’s Best Days Behind It?

Activist Hedge Fund Pershing Square Gets Tables Turned As Investor Unveils Activist Campaign At The Fund. What’s The Activist Looking To Achieve?

WeWork Founder Exits Stock To The Tune Of $700 Million Prior To IPO. Should Investors Be Concerned?

Symantec Shares Fall As Broadcom Pulls Bid. Why Did Talks Fall Apart?

The Trend Is Your Friend. A Discussion On Trend Investing

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Welcome investors to the Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies. Your hosts Julian Klymochko and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by accelerate financial technologies. Accelerate because performance matters. Find out more at www.Accelerateshares.Com.

Julian Klymochko: Welcome investors to episode 23 of the Absolute Return Podcast. I am your host, Julian Klymochko.

Michael Kesslering: And I am Michael Kesslering.

Julian Klymochko: Today is Friday, July 19 and despite it being the dog days of summer, still a number of very interesting events in the markets happening over the past week that we’re going to touch on this week. Off the top:

    • Netflix had a real tough quarter as they announced a decline in U.S. subscribers. Their stock subsequently dropped 10 percent as growth slowed. Are Netflix best days behind it?
    • Ultimate irony as activist hedge fund Pershing Square gets its own activist. So tables turn on Bill Ackman’s Pershing Square. What is this activist looking to achieve?
    • Stunning story out of The Wall Street Journal on WeWork and its founder exiting 700 million dollars’ worth of stock before it does its initial public offering. Should investors be concerned about this?
    • Then we are going to talk about Symantec, potential M&A deal that was in the works. Publicly announced a rumour, Broadcom going to acquire Symantec, but that deal fell apart at the 11th hour, with Broadcom walking away, and Symantec shares falling precipitously. We are going to talk about why things fell apart on that deal.
    • Lastly, we are going to touch on our blog post this week entitled The Trend is your Friend: Long-Short Investing using the trend factors. A Discussion on Trend Investing.

Getting to the Netflix quarter, its stock slumped about 10% after reporting its second quarter results, which missed its own guidance by a substantial margin. The company added just two point seven million subscribers globally in the quarter, well below its guidance for five million additions. They missed their own guidance by almost 50 percent. I know the street was slightly above their guidance at roughly five point one million adds and they got to only two point seven million, which certainly disappointed investors. Another really disappointing fact about the quarter was actually lost 130000 subscribers in the US in the quarter. Now, this is the first time that they actually lost subscribers on a net basis since 2011. They have had consistent growth in the U.S. for nearly 8 years and this is the first quarter in which that reversed. So subscriber growth for Netflix is perhaps the most important metric for investors. It is far more important than any sort of fundamental financial metrics such as revenue or a cash flow, return on equity, anything like that. Number one, investors really care about subscriber growth.

One potential reason for the decline in U.S. subscribers is the company recently raised prices for all of its U.S. customers. The price of a standard Netflix subscription now costs thirteen bucks a month. This is actually a dollar higher than one of their main rivals, Hulu, but Netflix already has quite a strong grip in the U.S. They were really the pioneer in the streaming sector. They had a huge head start on all their competitors. They currently have more than 60 million Americans paying for a Netflix subscription. That raises the question, have they reached the saturation point in the US? Now, if you think about it, there is 128 million U.S. households. If you take into account password sharing, because each subscriber has a number of accounts that can subscribe under it. In addition to some households obviously not being interested in Netflix, then it makes you think, they are already at roughly nearly half of households and many others would share that same password. Many are asking have they reached that point of saturation in which they are kind of in a no growth environment in the U.S. That is kind of a major consideration that investors are thinking about right now.

Nonetheless, Netflix blamed its content slate for this large missed in subscriber growth. The main reason for the disappointing results, according to Netflix letter to shareholders. They stated, quote, “Q2 as content slate drove less growth and paid net ads than we anticipated.” they are addressing the decline in net additional subscribers in their Q2 letter. The company said it expected that U.S. will return to more typical growth in the third quarter. They gave guidance…U.S. subscriber growth of 800,000, so they are expecting a reversal there. Based on new content, including new seasons from Stranger Things and Orange is the New Black. A couple of their hit shows expecting to drive subscriber growth in the current quarter.

Analysts expect the company to invest a stunning 15 billion in content this year. Now Netflix is burning or they expected to burn three billion dollars in cash flow this year. Their capital expenditures of 15 billion are expected to exceed their operating cash flows by 3 billion, which has been the case for a long time, so they are investing heavily in content and they are still really not getting that U.S. growth. That trend certainly could be a huge concern for investors, in my opinion. Now, another major looming factor is that they are disappointing quarter comes as the company faces looming competition in the streaming market that it pioneered. They are facing upcoming competition with Disney. Disney is just a Goliath in the content space, and they are coming out with a really interesting offering in the near term, along with Apple, AT&T, which recently acquired Time Warner, and they have a ton of good content. Then Comcast, so you have these four heavyweights entering the streaming arena shortly. A lot of them, they are now starting to take back their content. You saw that Netflix is losing Friends; they are losing The Office, and those are two massive series, massive shows for them. Those will be gone soon as these competitors take that content back. Certainly, a rough time currently for Netflix and I think they face a pretty perilous future just given the substantial uptick in competition that’s coming down the line here. But none the less Reed Hastings, Netflix CEO, remains confident as ever in the business in a conference call, he stated, quote, “If investors believe in Internet TV, our position in the market is very strong.” So there you have it that is straight from the mouth of Netflix’s CEO. What are your thoughts on their latest quarter and the future of Netflix?

Michael Kesslering: Yes, going back to some of your earlier points. Is, number one, the comment the lack of growth while the decline in U.S. subscribers being their content to blame. Well, that is kind of an issue if you are spending 15 billion dollars per year on content. I would argue that is not a very good excuse. That is actually a bigger negative if that is actually the issue.

Julian Klymochko: Right, because they invest billions of dollars to get growth and then you are not getting that growth. Then where is that return on capital?

Michael Kesslering: Absolutely, and then another thing is that the entire bull thesis on Netflix has been their pricing power. I have seen analysis that shows that they have pricing power in the 18 to 20 dollars per subscriber range per month and even up to as high. I have seen the analysis that like 25 dollars and that is very high. Keep in mind that I believe they spent about 10 billion dollars or so on content last year and they are expecting to spend 15 billion dollars this year. That is about a 50 percent increase, mean while they are only able to increase their pricing at 18 percent. Right there, you are seeing that their costs are growing faster than their revenue, which is negative, but also you are seeing an increase in churn through that 18 percent increase. Overall, I think that is really a big issue with the bull case. The only thing that I would mention in defence for Netflix is that this is 130,000 subscribers lost on a base of around 60 million. That is about point two percent of their subscriber base. If they do in fact just continue, this is just a blip and they continue growing, that is fair. Does not do a big damage to the overall thesis, but it will be interesting to watch. The other aspect that I did want to bring up is how they have handled this earnings missed and their lack of preannouncement. Companies like Apple and Microsoft, when they know they are going to fall short of analyst estimates or their own estimates, they will pre announce or update their guidance. Netflix does not do this, and I guess it could be some rationale for them not doing this was that, yes, they were going to miss on their subscribers, but they did have a slightly larger profit than they had expected. But like you had mentioned earlier, Julian, the subscribers are the biggest factor when looking at the company. The other aspect is they could have just seen this as being inevitable, that their stock price was going to take a hit with this news. Whether they issued the news three weeks ago or a month ago or today, not really a big deal. It is still going down.

Julian Klymochko: Right, and we need to take into account that if you look at the share price performance around pretty much any quarter from Netflix, it’s going to be wildly positive or wildly negative. Just given the variance in the volatility in the results.

Michael Kesslering: Yeah, absolutely and in terms of speaking to that point is on average, their daily share move on the day of their announcements is 13 percent. Compare that to seven point three percent for Amazon, 7 percent for Facebook and four point four percent for Apple. That is a lot of volatility.

Julian Klymochko: Certainly, in holding Netflix stock throughout quarterly results is not for the faint of heart. As you noted, pretty tremendous volatility as investors try to predict what they’re going to release in that quarterly result. Now, you talked on a number of interesting considerations and you mentioned kind of, how the price of Netflix, it is obviously very highly valued. I believe price increases are baked into that valuation. You talked about pricing power and, how the market really expects them to increase prices. However, they did increase price this quarter, and that was a main reason why they missed their guidance and missed estimates so badly. Then, they are going to lose three billion dollars negative cash flow this year. To make this a sustainable business. They obviously cannot be losing billions and billions every year. At some point, they need to get that to positive free cash flow. Well, how are they going to do it? It seems like they cannot let off the gas in terms of content production. Just given the tremendous competition coming out in the near-term. They are going to keep the pedal to the metal on content production of which they are spending 15 billion. That looks like it is only going to go higher, and so what else can they do? Well raise price, but does that risk slowing down the growth, which obviously the market does not like. You also have to take into account competition for content. There is so much competition out there for quality content. So clearly, on a supply demand perspective, you can expect that cost for quality content is only going to get higher, and therefore, the amount that they need to invest in content every year is certainly investors should expect that to increase over time further.

Michael Kesslering: Absolutely, and in terms of if they look to get into other areas like, sports things like that, that is not going to be cheap to get into as well, which will only push up prices.

Julian Klymochko: And what I am referring to as the ultimate irony, activist investor Bill Ackman as publicly listed a hedge fund, which is effectively a closed end fund, called Pershing Square Holdings. It actually got its own activist investor and as investment firm called Asset Value Investors that went public with its own activist campaign against the hedge fund. Now, this activist wants Pershing Square to pursue a more aggressive share buyback program to close the discount between the fund’s trading price and its net asset value or the value of all of its underlying holdings. Asset Value Investors owns about 3 percent of Pershing Square Holdings, which trades in London, I believe. It is pushing back against Pershing Square‘s decision to issue 400 million of 20-year debt without consulting shareholders. Those are the main complaints from this activist investor. They don’t want them to issue debt, they’d rather see them conduct a more effective share buyback program.

The reason that they are pursuing that is that Pershing Square, its share price, is actually 30 percent lower, it is at a 30 percent discount to its net asset value. That means that it is trading 30 percent less than the value of all its underlying holdings. Now, its underlying holdings are very liquid equities such as Starbucks and Chipotle. One reason for this discount is performance; since Pershing Square Holdings went public in 2014. They are actually down 26 percent that is roughly over a five-year performance of negative 26 percent versus the S&P 500, which is up 74 percent over that period. So roughly hundred percent divergence from its underlying benchmark and investors certainly are not happy about that. We got a quote here from this activist Asset Value Investors. They stated, quote, “Shareholders have suffered from a persistently wide and growing discount to NAV or net asset value, which is even more remarkable given the company’s investment portfolio, is comprised of large cap liquid listed securities.” So there you have it that is a quote from the activist here. I should note that there is some detail on their positions, so they actually went along Pershing Square Holdings and they shorted some of the underlying stock within Pershing Square as portfolio. They are actually hedge; they are looking to capitalize on the closing of the discount to net asset value. This is a strategy that we call closed end fund arbitrage, which we have a number of years of experience doing. It is interesting to see Asset Value Investors to conduct an activist campaign combined with a closed end fund arbitrage strategy on Pershing Square Holdings. What are your thoughts on this interesting activist situation?

Michael Kesslering: First, specific to just closed end fund arbitrage is that you would not see this type of discount in Canada just because the closed end funds in Canada typically do have a once a year special redemption where you are able to redeem at NAV.

Julian Klymochko: That means get your money back. They buy back your stake in the fund and they give you cash or securities at net asset value.

Michael Kesslering: Absolutely, so that plays a role in constraining the amount of the discount to NAV, whereas this 31 percent or 28 percent I believe right now discount that they are trading at is really high. Given the nature you had mentioned how liquid the names are, there are large cap names. There is only about 10 names in their portfolio and really, you would typically see about a 10 to 15 percent discount, and so that’s why this is quite interesting specific to Pershing Square. The other interesting aspect is that just because of the nature of Bill Ackman investment strategy. Is he would be railing against a management team that was, continued with actions like these. And so that’s where you can find a lot of good points with Asset Value Investors, is they make the argument that right now, after this debt issuance, the funds target debt equity ratio will be about 25 percent. And so if that is their new targeted debt to equity ratio in terms of their capital structure, that they could have achieved this through buybacks instead by just buying back equity and controlling that side of the equation as opposed to increasing the debt level. This is very clearly, about increasing the assets under management, which is where Pershing Square gets management fees from. That is entirely, the strategic rationale behind.

Julian Klymochko: Yeah, you look at their incentives to close that discount. They need to buy back stock. Do a tender offer, or worse case, liquidate, and there goes their assets. They are going to be making less money. Certainly, incentives for Bill Ackman are to do nothing about this, but as you indicated, he is an activist and this would be the exact strategy, that he would use on another fund, if he had a chance. It is somewhat ironic; I think it is a really interesting strategy in terms of closed end fund arbitrage. There is a number of players in North America, who conduct that we used to. We have done a number of these in the past. More so on quiet basis, but there are a number that do it in the U.S. Bulldog Investors is a hedge fund that it’s really their bread and butter, which is a closed end fund activism. I believe Saba Capital Management is getting into that as well. It is really a tried and true strategy. In fact, I believe Warren Buffett used to do it in his Buffett partnership days, which is, you know, buying undervalued, closed end fund and agitate for some sort of event to get it to net asset value, whether it be a liquidation or a tender offer or something of that nature. I know for Sanborn Maps, he convinced them to sell out of their investment portfolio and either, distribute the proceeds or buyback stock. It can be a lucrative strategy if the opportunity is there, but in this situation, ladies and gents, grab your popcorn and watch what happens here, because we think it’s a very interesting and entertaining situation.

Michael Kesslering: I would just like to bring up one more point on the debt itself. Is that Asset Value Investor also pointed out that it does carry a 31 percent make whole premium that would be made if the debt is repaid before maturity. This actually acts as kind of a quasi-poison pill that really limits their ability for flexible capital allocation in terms of buybacks in the future, if they wanted to repay debt and buyback more shares.

Julian Klymochko: A bombshell of a story in The Wall Street Journal this week where they revealed that WeWork, which is the massive co-working real estate company, WeWork co-founder and CEO Adam Newman has cashed out more than seven hundred million dollars of his WeWork stock ahead of their anticipated initial public offering. Again, that IPO rumoured to be happening in the near term. It is something that we do expect in 2019. Now, this revelation comes amidst previously discovered corporate governance mishaps at the company, including when Newman acquired a commercial real estate buildings in order to lease them back to WeWork. So certainly some concern from a corporate governance perspective at WeWork. Now, this is problematic because historically Venture Capitalists and other investors have been sceptical of sales by founders and executives of the start-ups that they’d back prior to the IPO. They prefer that these insiders have skin in the game, keep their wealth tied to the company’s fortunes until it goes public. Newman, what he did? He recently sold all this stock. No one knows exactly what his remaining position is, but certainly 700 million is unprecedented in terms of size of pre IPO start up cash outs.

But what he did with his money is one of the many things as he set up a family office to invest the proceeds and has begun to hire financial professionals to run it. He is obviously bought a bunch of commercial real estate in order to lease back to WeWork. He has also spent more than 80 million on at least five homes, but like I said, this is the largest start up exit by a founder prior to IPO. He has kind of been steadily selling shares over the past five years, since 2014. If we look at a couple of precedents, I saw more exits by founders or early backers of more than 100 million in both Zynga and Groupon. If we look back at that post IPO performance, both those companies, well, it was not pretty. Those stocks tanked dramatically. It gives you an indication of what you could perhaps expect. Just given the dynamics here on the WeWork, pre IPO insider stock sales. What are your thoughts on this really cool story from The Wall Street Journal unveiling these kind of additional corporate governance mishaps at WeWork.

Michael Kesslering: Yeah, so in addition to the actual sales, he is also taken out the loans that are collateralized by his shareholdings. That side has been facilitated by J.P. Morgan, and so what’s interesting about that relationship is that J.P. Morgan is leading WeWork efforts in another financing round that they’re wanting to complete right before the IPO of another three to four billion dollars and then raise an amount of money in the IPO. You can see where there is a little bit of a conflict there where they are lending to the CEO. Based on with the collateral of the shares while they are also doing a financing for the company. That is a little bit interesting, but the other interesting aspect is just whenever you talk about WeWork, you talk about their valuation and in particular Softbank. When WeWork was last valued at forty seven billion dollars. That was when they had raised around two billion dollars from Softbank.

Julian Klymochko: And to clarify, Softbank being a Japanese conglomerate run by Masayoshi Son, Japan’s wealthiest individual, and Softbank runs the 100 billion dollar vision fund, which is by far the largest venture capital fund on the planet.

Michael Kesslering: Absolutely, and himself is one of the richest men in the world. The interesting aspect of that two billion dollar raise that they got from Softbank is that one billion dollars of the proceeds was actually used to buy out existing shareholders at a 20 billion dollar valuation verses that 47 billion dollar valuation that Softbank was investing in. The Financial Times actually did some great due diligence here where they got their hands on some documents looking at where institutional investors are coming in at in their valuation and where their interest lies in trading. WeWork and the midpoint, way below the forty seven billion dollars is actually around the twenty three billion dollar range. That is really interesting as I would be very interested to see how these investment banks are pitching WeWork on their IPO when you’re seeing institutional demand at that 23 billion dollar range. That would be a tough pill to swallow for WeWork.

Julian Klymochko: Not just that, but you talked about valuation, and at the end of the day, I am still shocked by what WeWork has been able to accomplish here, that incredibly tremendous valuation for just a real estate company that is generating tremendous losses. I believe they are losing billions of dollars per year, but they have somehow managed to perhaps, hoodwink investors to assigning them a valuation far in excess of any of their comparables. And as you know, we see probably hundreds of other co-working start-ups that are executing the exact same business model. It appears like there is really no barriers to entry behind here. Nothing proprietary, no real competitive advantage, aside from perhaps a little bit of brand name behind WeWork, but they’ve not only gotten this incredibly massive valuation, but they’ve allowed the CEO to cash out a huge portion of his stake for hundreds of millions of dollars. In fact, almost a billion dollars prior to them really showing any sustained success. I think this WeWork situation specifically is important for investors to pay attention to I mean. The amount of red flags you look at it and you can’t help but think, man, this thing is going to be a case study in the future on, what can go wrong and who knows, perhaps we’ll be proven wrong on this one, but I think that investors should take notes about what’s happening here. Then also note the post IPO performance if it, in fact, does ever go public, because I don’t think that it has a bright future as a public company. Just given all these red flags, it is actually pretty shocking.

Michael Kesslering: Absolutely, and in terms of the bull case, that is touted with WeWork it is summarized in that once they get to scale. They’ll have bargaining power over their landlords and they’ll be able to dictate their own terms as well as renegotiate leases in a downturn, and to me, that just doesn’t really seem like a strong, bold thesis where you’re relying on renegotiating in a downturn and the power over your landlords. It is just does not seem like a compelling thesis for me.

Julian Klymochko: And you have to think about the current environment that we are in, and the economy is doing great. Well, what happens to WeWork when the economy falters? When not so many start-ups are getting funded to be able to pay them, the cash flow they rely because what WeWork does is they sign long term leases with commercial building owners, office building owners, and they rent them out on a short term basis. Well, what happens during a recession is going to be far fewer companies renting out that space. So one of the bigger cases, just aside from this huge valuation is, look, they cannot make money in a bull market. Well, what happens during a recession?  How much will they suffer when we face a downturn of which it is never really faced before?

Wanted to touch on some M&A, some merger and acquisition activity. Actually a deal, a potential deal. It fell apart this week. Symantec shares plummeted as much as 15 percent this week as would be acquire Broadcom actually walked away from this rumoured takeover. What happened there was the Symantec board was insisting on at least twenty-eight dollars per share. Now, Broadcom initially offered $28.25 and it looked all good. But what happened was it actually pulled its bid down by a couple of bucks after it discovered some things it didn’t like during the due diligence process when it was closely examining Symantec books. What was stunning also is that this deal seemed quite close to being signed. I mean, media reported that Broadcom had twenty one billion in financing already lined up, the companies were expecting one point five billion in cost synergies, and if you follow the markets, you know that Broadcom is just a voracious acquirer. They are real consolidator not only in the semiconductor space anymore, but also clearly, they are moving on to software with Symantec or the attempted acquisition of Symantec.

Getting into some other deals that Broadcom has done. They are a real deal junkie. They recently bought CA Technologies for 19 billion just last year. If you also remember, they tried to purchase another giant, Qualcomm, but the U.S. DOJ, the Department of Justice, blocked that deal because Broadcom is an offshore entity. But Symantec shares, they have been dogged in recent years by management turnover and a softer core business as cloud security companies have captured enterprise market share, and as newer companies offer ways to protect mobile devices.  Broadcom looking to bring Symantec under their wing extract some synergies and really harvest that cash flow, but I guess it is not meant to be. With Broadcom abandoning Symantec at the altar and no deal being signed, Symantec shareholders not too happy with it, with the stock falling 15 percent and also another hedge fund investment strategy here. Is what we call pre-arb, where you get into ideal stock on rumours hoping that a definitive agreement is struck at a premium to your buy price so you can make short-term money, but here it looks like hedge funds involved in pre arb getting burned as no deal is to be had. What are your thoughts on this M&A situation?

Michael Kesslering: It is the really interesting aspect of this was how quickly everything came together. You had mentioned that they had secured around 21 billion dollars’ worth of financing for the transaction, the discussions early only lasted 15 days. It is quite interested on how quickly it came together. The other aspect is that this was part of Broadcom. The strategic rationale for Symantec was that they are over levered. They had about 4.5 billion dollars’ worth of debt, so there were some issues on that side. But for Broadcom, this was really diversifying outside of their semiconductor industry. What is interesting about that is just in terms of Broadcom revenue, I wanted to highlight a couple of things. Was that they actually derive 13 percent of their revenue from Apple and 4 percent from Huawei. This actually leaves them quite vulnerable to the impacts of the trade war, which just exasperate really made them very interested in Symantec in diversifying outside of some of these traditional revenue sources.

Julian Klymochko: Right and it’s not just Broadcom that’s struggling in the semiconductor space, but pretty much every semiconductor producer is really struggling with what’s happening with the U.S. China trade war. So clearly here, Broadcom looking to further diversify its revenues, and as I said, it is a real veteran, in the M&A game. They have done a ton of acquisitions. That is really the thing, which investors expect out of Broadcom. There like a shark, they got to keep moving. They get to keep doing deals in order to survive; they are a consolidator, a deal junkie in the space. They have had pretty tremendous success with that strategy. Their stock appreciating quite markedly over the past number of years on the back of that acquisition strategy.

We put out some research this week in a blog post entitled The Trend Is Your Friend: Long-Short Investing using the trend factors. When we talk about trend, what do we mean? Well, I refer to trend, and there is many different definitions out there in terms of what trend means. But specifically the factor that we’re talking about, we look at a number of different moving averages, so we like to look at when stocks, a 50 day moving average, how that compares to its 200-day moving average. Now, what a moving average of a stock refers to is basically the average closing price over the past number of days. The 50 day moving average, that refers to the average closing price of a stock over the past 50 days. Now, what this research revealed is we did run some simulations on Canadian and U.S. stocks over the past 20 years.

We did looked at it on a monthly rebalanced frequency and over the past 20 years, divided the market up in two deciles are each 10 percent and discovered that the top 10 percent of trending stocks, that is these stocks in which their 50 day moving average, was the highest above their 200 day moving average. Denoting a very good trend in Canada. That basket of stocks, the top 10 percent trending stocks returned seventeen point four percent annually over the past 10 years, which one hundred thousand dollars invested at a seventeen point four percent rate over 20 years. One hundred K would turn into about 2.5 million dollars. I believe double the stock market return. Not just that, but on if we look at the bottom 10 percent of the stocks with the worst trend, those are stocks whose 50 day moving average are far below their 2 in a day moving average. Now those decline 10 percent per year over 20 years, and that is in an environment where the market went up perhaps 8 percent per year. If you invested in that bottom decile, poor trend portfolio with that same hundred grand would have shrunk to only about twelve thousand dollars.

That is nearly a ninety percent loss over two decades. Utilizing these trend factors and of course, for a hedge fund such as ours, we would look to go along the top decile trend and short the bottom decile, because if you short these poorly performing securities, it can add further outperformance. If we look at the spread between the top and the bottom decile that is nearly 28 percent per year, which would obviously be an outstanding return. The number is quite similar in the U.S. The same 20-year simulation revealed a nearly 13 percent-annualized return for the top decile trend portfolio that is stocks whose 50 day moving average are furthest above their 200 day moving average. Then conversely, for the bottom 10 percent, the lowest decile with the poorest trend losing nearly 6 percent per year. I just wanted to point out that investing based on trend, looking at different moving averages. It is something worthwhile for investors to consider.

Even if you are more of a fundamental investor, it is really worthwhile looking at, where does this stock trade with respect to its trend? And I really would recommend looking to go long. If you are looking to go long the stock, make sure that it has a good trend and certainly don’t buy shares who have a poor trend or as I say, enterprising investors could even considering shorting stocks who do have poor trends just do hedge and generate additional alpha against their long portfolio.

And that wraps it up, ladies and gents, for episode 23 of the Absolute Return Podcast. Hope you enjoyed it. If you did, you can find plenty more on absolutereturnpodcast.com. Check those out, and until next week. Cheers and we will chat to you soon.

Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by accelerate financial technologies. Accelerate, because performance matters. Find out more at www.AccelerateShares.com. The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed.


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