Alpha Theory Blog

To Buy or To Sell, That is the Question

Cameron Hight, CFA | CEO of Alpha Theory — Wed, 18 Jan 2012 09:28:28 -0500

I was reading a recent article by Bloomberg news about Todd Combs, Warren Buffett’s new right-hand man on stock picking. The article illustrates how Combs consistently buys when prices fall. This buy-low/sell-high strategy is the counter-strategy of riding winners/paring losers which I’ve seen recommended by many traders, behavioral economists, technicians, and statisticians. So where is the truth? Like most disputed...

The Role of Diversity in a Better Future

Cameron Hight, CFA | CEO of Alpha Theory — Thu, 08 Dec 2011 13:31:00 -0500

The future is like a complex algorithm with virtually infinite variables. Mankind does not know the optimal inputs for the variables. Nature controls a large number of the most powerful variables, but mankind can shape many others. One way to think of the future is that mankind is in a constant search for the optimal set of inputs to determine...

The Cup is Half Full – Kahneman Style

Cameron Hight, CFA | CEO of Alpha Theory — Fri, 04 Nov 2011 14:59:15 -0400

After suggesting a solution and getting no negative feedback - “Gentlemen, I take it we are all in complete agreement on the decision here…Then I propose we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about.” – Alfred P. Sloan,...

Capitalizing on the Random Walk

Cameron Hight, CFA | CEO of Alpha Theory — Mon, 10 Oct 2011 13:03:27 -0400

Just how volatile have the markets been the last two months? Would you be surprised to know that August and September 2011 rank amongst the top 5 most volatile periods in the last 50 years? I was. I knew things were bumpy but I didn’t realize they were Top 5 bumpy. Volatile markets with high correlation can be the bane...

Multiple’s Personality Disorder

Cameron Hight, CFA | CEO of Alpha Theory — Tue, 20 Sep 2011 15:14:00 -0400

The pervasive use of PE multiples (Price-to-Earnings) to value stocks has always been perplexing to me. What do we use Multiples for? To help us make a more informed investment decision. Well let’s put that to the test and say that I’m evaluating Google. I determine that the PE multiple is 20x Earnings Per Share (EPS). What does that really...

SuperFreakonomics on the Macro Economy

Cameron Hight, CFA | CEO of Alpha Theory — Thu, 18 Aug 2011 17:11:54 -0400

“Freakonomics” is a New York Times best-seller written by Steven Levitt, a professor of Economics at Chicago, and Stephen Dubner, New York Times writer, that discusses how our common assumptions about what are true are many times wrong. The book was a smash hit and was followed up by “SuperFreakonomics.” In “SuperFreakonimics”, Levitt, an economist, explains why they do not...