Our Research
How we combine risk data and consensus
metrics to identify promising stocks.
At Lombard Analytics, our mission is to help you make better investment decisions by continuously identifying the amercian and european stocks exhibiting the most potential.
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How do we identify those promising stocks?
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How is risk management integrated in our models?
The answers to these questions reside in the statistical model that we apply on a daily basis. Let us tell you what it's all about, starting with a visual representation:
First Metric:
Computing a 12-Month Risk Profile
Our analysis start with by calculating, for each stock in our sample, a risk profile for the year to come.
A risk profile is a composite indicator based on several metrics aiming to estimate the capacity of the stock to hold or increase its value (or limit losses in case of market downturn) in the next 12 months.
Concretely, it relies on several considerations like the historical volatility of the concerned stock, its market capitalization, its economic sector, its dividend history or its behavior during previous market consolidations.
Second Metric:
Quantify a 12-Month Consensus
This second phase of our analysis process consists in computing consensus metrics on all stocks of our statistical universe. In other words, we want to obtain a clear, up-to-date view of what institutional inverstors (like banks, hedge funds and money managers) thinks of each stock.
This process is twofolds. We begin by combining all the expressed previsions published by financial analysts regarding a listed stock.
Then, we shift our focus to implicit opinions. Those differ from expressed previsions in the sense that they are not published, but reflect the actual decisions and preferences (buying and selling) from institutional investors. Implicit opinions are more complex to collect, but offer better forecasting power.
Third Metric:
Assess Trend Quality and Strength
Trend quality (also called ‘momentum’) assessment entails gauging the current direction and strength of a stock, a statistical process which allows confirming (or disproving) investors appetite for the studied company.
Concretely, it is calculated by combining several directional metrics and used by comparing the results to long term historical data or to peers (stock belonging to the same geographic of economic sector).
Final Step:
Combining into a Single Metric
The results of the three steps above are combined in a single composite indicator, the Risk-Adjusted Expected Return, which is evaluated both in absolute terms (current level compared to peers and history) and through recent variation (3-month delta).
It is our single best estimator of the 12-month performance of a stock, and the basis of all our decision, listing and client reports.
Our research helps investors across the globe composing an efficient and robust portfolio composed of high-qualiity international stocks.
But don't take our words for it, form your own opinion by checking the complete track record of our top-ranked selections.