Long-term investment strategy
We buy rising stocks for the portfolio and when rising stocks fall, we sell them off as quickly as possible so we minimize our losses in time or secure a gain.
We make sure that the portfolio only contains the shares that 1. beat the market return and 2. move in a positive direction.
During periods of major corrections (declines), we are either out of the market for a period of time, or choose to sell cards and speculate in price declines, called short sales. We quickly close our positions again to minimize the risk, as the market will move upwards over the long period. (historically seen).
Academically, it has been proven that, statically, there is a greater probability that if certain markets or stocks have risen or fallen within the last three to six months, this will continue to rise or fall within the next three to six months, respectively. months.
If you buy a broad portfolio of momentum papers that have shown increases over the past three to six months, you have a statically good probability of beating a standard index investment over time. Momentum is an academically well-researched and recognized method as well as a very convincing strategy that several foundations use in an attempt to beat the indices. Momentum pairs have proven to have provided a better return far back in history across both countries and asset classes. At Pillious, we implement momentum by comparing the stock with other stocks and assessing the strength of the rises / falls. To analyze us until a purchase, Mads Hansen, who is an equity analyst, prepares a technical analysis, where he uses several technical indicators to identify the stock’s possible upside and downside.
In the light of the above, it may make sense to implement the momentum factor in its investment strategy for the long-term securities (long-term), aiming to buy the asset classes that have risen the most and sell the asset classes that have fallen the most, as this trend is likely from an academic perspective statically will continue over a longer period. The strategy is to supplement up in performing stocks and sell poorly performing stocks out of the portfolio.
Over a period of six years, the result will be a much higher return than if, alternatively, only the stock market index as a whole (OMXC25) had been invested. The explanations for the success of this factor must be found in human behavior. It is important to use this factor in your investment strategy correctly, this is done by inserting a tight stop-loss trailing, in case the stock goes against your expectations and the analysis you have done, at stop loss, you are automatically stopped out of the trade provided that there is sufficient liquidity for this in the market. We trade in large financial markets and it is therefore rare that it does not sell automatically.
(But investing is always associated with risk, and you need to be aware of that as an investor in the market).
We have used momentum to select Danish shares since 2014, and as can be seen from graphs and key figures on the website, we have achieved significantly better returns than the market because we use momentum combined with technical analysis, where we trade on the fluctuations in the upward trend and constantly search for, to seek out papers that do not show sufficient momentum for our long-term portfolio. Shares that the portfolio consists of: Value shares are shares that are currently traded at a price that is lower than their actual intrinsic price. This basically means that the shares are undervalued, ie. traded at a price lower than their true value, making them an attractive investment opportunity for investors. We do what is called a screening of the share, where we go in and assess the company’s profitability before we invest, ie. we go through the majority of their key figures to compare with previous financial years. Accounting analysis is also something we certainly use in our fundamental analysis.
We define which investment strategy we want to follow. Many traders’ strategy flutters in the wind and is influenced by the general mood. We trade actively on short-term dynamics in the market in day trading / swing trading and apply the momentum factor to the long-term trades, where we ride the wave and when it turns we sell out and search for a new stock that shows momentum. We systematically follow a strategic allocation rule, which we always maintain regardless of the news flow. We have already decided on the weighting as well as when we take a loss and profit. The most important thing about strategy is to balance upside against downside. In the momentum strategy used in the long term, we analyze the current situation of the markets in relation to the very long-term trend and adjust our allocation accordingly to take advantage of large deviations for long-term trends.
You hide your losses with related counter-transactions instead of realizing them. You value each investment in isolation and will not release it until it has paid off. When things go wrong, you focus on how to trade the losses in the existing portfolio at home instead of what the optimal portfolio will be in the future. You protect yourself from unpleasant information and decisions, take them to you and analyze this information. You have the greatest confidence in the information you would like to hear, and therefore do not react to new information that could have changed your mind significantly. You distort unpleasant information in such a way that it seems to confirm what you have done. You blame yourself for your bad decisions and instead blame others or imagine that current problems are not really there. You are more interested in the past than the future You follow with interest the gain or loss in each position as well as the overall value of the portfolio, which you would like to know day and night. If you have to choose a position to sell, take it with the biggest profit instead of the one with the worst future prospects. You never think “If I did not have this position, I would buy it today.” You exhibit deviant attitudes You may be extremely distrustful of everything and everyone by nature, which is why you are never properly exposed to the long-term rises of the markets or invest in only a few things. Or you may be extremely stressed by the markets, and have a sick urge to recover losses, are pernicious, you may not be satisfied, you may be hyperactive, or pretending to be something you are not. You do not understand that a moderate knowledge and insight is not enough. One needs to know more than many of the most skilled professional investors to beat the market. The most talented have a towering IQ, access to the best information as well as extreme self-control and many years of experience.
Relative momentum: At the time of buying, it is important for us that the share has shown the relatively best price development compared to other shares in the index. This is because research has shown that there is a greater statistical probability that markets or stocks that have risen or fallen the most within the last three to six months will continue to rise or fall within the next three to six months, respectively. months.
Risk-adjusted momentum: The strategy in Pillious is therefore to continuously adjust the Danish portfolio to include the shares from the Danish C25 index that have shown the most momentum over a longer period or show other momentum that can justify a purchase, we usually see over a period which is three to six months. In addition, we also go in and assess the last 5 days’ fluctuations, which have shown the best momentum from a risk-adjusted point of view. As a rule, we have the stocks on a watch list before we invest to follow the fluctuations closely day to day. On our candidate list, we do not have very many stocks at a time to ensure that the simple stock gets enough attention.
• Asness et. al (2014): Fact, Fiction and Momentum Investing
• Asness et. al (2012): Value and momentum everywhere
• Geczy & Samonov (2017): Two Centuries of Multi-Asset Momentum (Equities, Bonds, Currencies, Commodities, Sectors and Stocks)
• Griffin et. al. (2003, revideret i 2015): Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole
• Hurst, et. al (2014, revideret i 2017): A Century of Evidence on Trend-Following Investing
• Jegadeesh & Titman (1993): Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency