Our aim at Woozle research is ultimately to help our clients gain an edge in an almost efficient and highly competitive market. The success of our business is inextricably linked to that of our clients and their ability to generate alpha, to beat the market. This singular truth against which we should be benchmark our work has come into sharper focus following the implementation of MIFID regulations on 1st January – now client and prospective clients must continually ask themselves important questions about how they interact with the research providers.
What value do I get from this service? Is there any tangible evidence that this research helps me deliver positive P&L? Is this information differentiated or correlated with something I’m already getting elsewhere? Have I cut my approved vendor list too far to the extent that I might be missing valuable insights that competitors are receiving?
These are all important questions that fund managers should always be asking of themselves. As a provider of such services, it’s also necessary that we hold ourselves to a similar standard to ensure we are always focusing our human and financial capital in the pursuit of delivering solutions that provide bigger and better ROI’s for our clients. In short, to make sure we measure ourselves by the same standards that our clients measure themselves – alpha generation.
In that spirit, I’m pleased to be able to share the first of many, our Earnings Scorecard for Q3-2017.
This scorecard encompasses the results from our earnings previews on more than 20 companies that reported financial results to the market in calendar Q3-2017. We use an objective, fair, and consistent methodology to measure our performance.
- Earnings Previews are distributed to our clients 14 days prior to any major company earnings/sales release.
- We are required to take either a long or short position in every name we cover – no sitting on the fence here!
- We measure the performance of our ideas starting from when we send our earnings preview to clients (i.e., 14 days prior to earnings) and finish 14 days prior to the event day. This period of 28 days is the Earnings Period and we further segment this period into 3 different sub-periods:
- Pre-Earnings relates to the period from T-14 to T-2 days out from earnings.
- Earnings relates to the period from T-1 to T+1 (the earnings date itself plus the days either side)
- Post-Earnings relates to the period from T+2 to T+14
- We calculate alpha on an idea level based on taking the return from our long/short idea on the company vs. an equal and opposing position on the relevant sector benchmark (e.g., Eurostoxx 600 Retail sector).
- The most important number is clearly our sector-relative alpha over the period. However, to further decompose our performance we also measure our Win/Loss ratio and Hit rate:
- Win/Loss ratio is calculated as the average percentage return from our winning ideas divided by the average percentage return from our losing ideas (i.e., how are the winners relative to the losers).
- Hit ratio is calculated as the number of successful ideas minus the number of failed ideas divided by the total number of ideas we have over the period (i.e., the percentage of times we get it right).
In summary, Woozle Research delivered 2.6% sector-relative alpha exclusively through the use of primary research and human intelligence gathering techniques. We spoke to thousands of key company stakeholders to build up mosaic of real-time crowd-sourced opinion that delivers leading and exclusive insights on company fundamentals.
Look out for our Q4-2017 Earnings Scorecard which will be released in late February once all our companies have reported.
Good Luck with the markets in 2018!