Expectation Risk Factor– Know the Number
Investors impound vague and ambiguous information into their expectations for a stock’s growth, decoupling stock prices from their underlying fundamentals. This leads to loss.
Applying an actuarial-based approach, we developed a proprietary risk metric to avoid this behavior, the Expectation Risk Factor (ERF). This measure calculates the probability the company will fail to deliver the growth implied by its stock price.
Using the ERF as the foundation of our investment methodology, we can apply these probabilities to any portfolio or investment universe. We build portfolio solutions that aim to provide a dramatically differentiated and uncorrelated source of outperformance by simply avoiding the losers – overpriced stocks caused by human behavior.