Head of Equity Strategy
The Equity Radar is designed to pick out equities that perform well relative to other equities in the same industry.
The equity universe is the S&P 500, Europe STOXX 600, S&P/Topix 150, S&P/TSX 60, S&P/ASX 200, BNY China Select ADR, FTSE Russia IOB, S&P Asia 50, Hang Seng, Hang Seng China 100, Straits Times, in addition to a custom ADR universe tracking Latin American stocks.
Equity Radar scores equities based on seven different factors: Value, Yield, Quality, Leverage, Momentum, Reversal, and Volatility. All factors are normalised to have same mean and variance in order to make comparisons across industries. Furthermore, all factor scores are designed so that higher is better.
The Equity Radar should not be interpreted as trade recommendations, bur rather as simple analysis.
Factor definitions
Value
Based on the ratios: EBITDA-to-EV, book-to-price, earnings-to-price, cashflow-to-EV, and sales-to-EV. For financials and insurance only book-to-price and earnings-to-price are used. For REITs the EBITDA-to-EV, book-to-price, earnings-to-price and cashflow-to-EV are used.
Yield
Based on shareholder yield for non-financials (including insurance) and dividend yield for financials. Shareholder yield is a measure of total returned capital to shareholders which is the sum of dividends paid, net capital stock, and net change in long-term debt.
Quality
Return on equity (ROE), return on assets (ROA) and return on invested capital (ROIC). ROIC is not used for financials and insurance.
Leverage
Net-debt-to-assets for non-financials and REITs and equity-to-assets for financials and insurance.
Momentum
Based on the 252-day minus 21-day price change. A high score indicates a large price increase, and a low score indicates a large price decrease.
Reversal
Inverse of 21-day price change (so stocks that have declined by a large amount score higher).
Volatility
A measure of 360-day volatility using the Rogers and Satchell Model and focusing on downside volatility only. Low volatility is indicated by a high score.
Total
A score for comparing equities across all seven factors above. It is calculated as the average of the seven factor scores above.
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
