We believe investment success requires original research, proprietary insight, and objective analysis. Rather than depend on the work of others, we perform all of our research in-house. As a result, we have conviction in our decisions and confidence in the outcomes.
Individual Security Selection
Black Cypress’ investment approach is built on independent, in-depth security 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 our investment thesis. The depth of our research provides conviction and a formidable edge.
The economic cycle–the turning point from expansion to recession in particular–has caused the vast majority of negative market returns. Since the late 1960s, the S&P 500 has declined an average 30% in recession-driven bear markets. It is for this reason that Black Cypress developed a proprietary macroeconomic model that utilizes leading economic indicators (all publicly available and most of which are provided by government agencies) to attempt to gain advance warning to probable inflection points in the economy.
We believe our economic model has a fundamentally-sound basis and avoids the core pitfalls of back-testing through:
- A foundation built on the research of experts in the field of leading economic indicators. Our model therefore has strong economic intuition (no data-mining)
- Use of unrevised or lightly revised and therefore historically consistent data with no hindsight bias (also called look-ahead bias or survivorship bias)
- Credible data sources
- Large sample size encompassing nearly 12,000 trading days across the last 50 years (not susceptible to a short-term and therefore fleeting relationship)
- Simple and robust methodology
We do not claim to have a fool-proof recession prediction model, only that we have worked to tilt economy-wide probabilities, in addition to company-specific ones, in our favor. We continue to manage risk accordingly.
See our results.