HOW WE SEE THE FOREST AND THE TREES
The typical investment strategy often misses the bigger picture. Our independent, in-depth research lets us see the trees. Our proprietary macroeconomic model, the “Canopy” that figuratively covers our portfolios, lets us see the forest.
SEE THE TREES: Individual Security Selection
Black Cypress’ investment approach is built on independent, in-depth research. We intimately know our holdings. Our initial research process for an investment idea generally takes several weeks and includes industry and competitor analysis, the methodical review of public filings, building valuation models, and developing and stressing an investment thesis. Other investment managers often perform minimal research of their own or may depend heavily on the research provided by others. While most of our ideas fail to meet our strict criteria, an investment will find its way into our portfolios if it trades with a suitable, risk-adjusted discount to our estimate of its worth and if it improves the expected return and overall diversification of our portfolio.
SEE THE FOREST: The Black Cypress “Canopy”
The economic cycle–the turning point from expansion to recession in particular–drives the vast majority of negative market returns. It is for this reason that Black Cypress developed a proprietary macroeconomic model that offers advance warning to probable inflection points in the economy. Should a forthcoming recession be deemed probable and broad-market valuations be deemed elevated, portfolios will be de-risked by (1) reallocating to less economically-sensitive businesses, (2) raising cash, (3) increasing short exposure, or through a combination of these, depending on an account’s mandate.
Our Canopy, according to our historical back tests to 1968, would have protected investors from an average 18% market loss on each of the occasions that warnings were generated by our model.
See our results.