UO Matrix - Establishing Predictive Value: Applied Indexation, Hierarchical Data Sets and Competitive Market Information (rev.)

 

In advance: At Venn’s intersection, sets and subsets of shared and competing interests endure. The competitive market information offered by incorporating sector/industry/subindustry hierarchical data sets in research processes lends compelling perspectives on corporate profiles, peer group analytics and valuation. At times however, often when innovative data analytics are institutionalized, Alpha becomes Beta in the context of incremental portfolio performance attribution and prompts the need for more refined fundamental analysis.

The importance of a disciplined cross-asset multi-factor approach to Tier-2: Alpha and Alpha-Beta screening is underscored after charting the descriptive interrelationships and modularity of corporate business segment operations (BSOs), requisite when creating or assessing nascent indexes and evolving investment universes. Apparent in audit of the differentiated growth rates embedded within company revenue lines and resultant capital market performance dispersion, BSOs effectively serve to delineate drivers of valuation and establish even greater relativity among competitive peers at distinct points of inflection.

Successful trading strategies (conventional, index-plus, factor-based, systematic) and adaptive investable motifs (niche, thematic, megatrend) isolate Value in Growth, and Growth in Value, aligning the prospective Alpha drivers directly associated with ecosystem composition and supply chain verticals.

The dynamic principles of BSOs evident during benchmark analysis are three-fold: 1) multinational and Large-cap companies function as sector/industry/subindustry proxies based on scale (Alpha-Beta), 2) Small- and Mid-cap companies participate as competitive peers (Alpha) and, hence, acquisition candidates and 3) among subsets of 1) and 2) are companies provisioning multiple economic sectors, asset classes and geographies.

For a static template illustration of background methodology plus real-time applications, we revisit last year’s <U/O> Matrix - Establishing Predictive Value: Applied Indexation, Hierarchical Data Sets and Competitive Market Information exercise (click here).

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