Strategic Investor Radio

Market Neutral Investing With Gary DiCenzo of Cognios Capital

In this episode of Strategic Investor Radio, host Charley Wright interviews Cognios Capital CEO Gary DiCenzo. The two gentlemen discuss Cognios’s “ROTA ROME” investment methodology, which seeks the best companies in terms of Return On Tangible Assets (“ROTA”) and Return on Market-value Equity (“ROME”).

Why does Cognios think tangible assets are so important? DiCenzo explains that “good will” accounts for the majority of intangible assets, and that his firm has determined that “ROTA” is the best metric to find companies that make the most of their available resources. The “ROME” element is there to make sure the stock is trading at a good price at the particular time, because even good firms can be overpriced.

How confident is Cognios about the veracity of its ROTA numbers? DiCenzo explains that Cognios only invests in S&P 500 companies, and that he’s confident in the integrity of their data.

When Charley refers to Cognios as a “quantitative” operation, DiCenzo clarifies that his firm doesn’t use technical analysis, earnings momentum, and other such measures, but instead does a deep dive into company fundamentals. ROTA ROME provides the structure to comb through millions of pieces of fundamental data to find the best companies for the Cognios portfolio.

Cognios currently operates one ’40 Act mutual fund: the 5-star rated Cognios Market Neutral Large-Cap Fund (MUTF:COGMX), which is also available in institutional-class (MUTF:COGIX) shares with a $100,000 initial minimum investment. The fund’s investor-class shares, which have a $1,000 initial minimum, returned an annualized +7.20% for the three years ending April 30, 2015, ranking in the top 7% of their category.

The fund uses a “systematic, repeatable process” to isolate alpha – which, in DiCenzo’s view, is all investors should be willing to pay for. The fund is market-neutral with between 190-200% gross market exposure. The long portfolio normally consists of about 45 names with an overall beta of 1.0. The short portfolio is more diversified and more volatile, with a beta of around 1.5. To balance out the risks, Cognios invests around $1 long for every $0.66 sold short.

Equity Research With MarketDNA's Matthew Rossi

Matthew Rossi is the founder, managing partner, and chief of research for MarketDNA Investment Research. In this episode of Strategic Investor Radio, Mr. Rossi explains his firm’s eponymous MarketDNA product, which takes intraday data and runs it through an algorithm to “spit out” equity trades with 80-90% accuracy. Host Charlie Wright calls MarketDNA a “fascinating approach of how to invest.”

MarketDNA uses around 100 filters to ex-out “noise” and find the 1-2 big derivatives trades happening because of inefficiencies in information. Sometimes this means finding “insider trading,” and Rossi shares a story of meeting Martha Stewart’s brother on a golf course before the infamous ImClone trade that landed her in prison. According to Rossi’s story, Ms. Stewart’s brother asked him to lie on her behalf, claiming she traded on the basis of his research instead of illegal inside knowledge. Needless to say, Mr. Rossi refused!

Rossi also discussed an incident with OPRA (the “Options Price Reporting Authority” – no relation to Ms. Winfrey) when MarketDNA’s algorithms noticed its servers were down and received a phone call from a suspicious OPRA executive asking how they knew – no one else in the country had.

MarketDNA typically holds 7-10 positions, long or short, at any given time, and each of these positions is normally held for 3-5 weeks. The firm’s clients are hedge funds and institutional investors, but it has begun making a la carte research available to individual investors. These one-off recommendations come instructions to buy or sell-short with entry and exit prices, but no other research.

When asked what causes some MarketDNA trades to fail, Rossi blames short squeezes and raised guidance around quarterly earnings. Fortunately, most of MarketDNA’s trades aren’t earnings-related.

When asked what keeps him up at night, Rossi cites the excitement of his work – trying to identify a previously unobservable trade, and making sure no one out there is cheating.

Long/Short Credit Investing With Guy Benstead

In this episode of Strategic Investor Radio, host Charlie Wright interviews Guy Benstead of Cedar Ridge Partners, a Registered Investment Advisor (“RIA”) based in Greenwich, Connecticut. “We’re bond guys,” says Mr. Benstead, in reference to his firm.

Cedar Ridge specializes in unconstrained credit strategies. It operates private funds, separately managed accounts (“SMAs”), and one alternative mutual fund: the Cedar Ridge Unconstrained Credit Fund (MUTF:CRUMX) that make investment decisions based on the firm’s top-down macroeconomic analysis combined with its “deep dive credit work” on individual securities.

If Cedar Ridge’s funds were long only, then much of this in-depth research would be for naught, since research can turn up bad bonds just as easily as good ones. Therefore, Cedar Ridge’s funds operate with a long/short mandate, and with positions spread across about 100 securities, or so. Benstead points out, however, that this doesn’t mean the funds own bonds from up to 100 different issuers – the positions include several bonds from some of the same issuers (at different maturities).

The funds’ long portfolios consist primarily of corporate and municipal bonds, along with preferred stock. Their short portfolios are made up of corporate bonds thought to be “overpriced,” along with a “core Treasury ballast” to hedge against interest-rate sensitivity.

One thing that separates the Cedar Ridge long/short credit funds with others in the space is that Cedar Ridge doesn’t use derivatives. Benstead says that Cedar Ridge tends to own the same securities as typical bond investors, but the firm operates like a great chef, arranging the ingredients in a different way.

Evaluating Managed Futures Managers With Mark Melin

In this episode of Strategic Investor Radio, host Charlie Wright interviews Mark Melin, managed futures consultant, columnist and staff writer for ValueWalk.com, and author of three books on managed futures.

Growing up in Chicago, Mr. Melin says that most of his friends’ fathers were derivatives traders. Derivatives were the center of the financial universe from his perspective, and this background has served him well. Mark has 15 years of experience in the managed futures industry, and in 2011, he made the jump over to journalism. “I never realized I would enjoy a job as much as I do,” he says of the transition, adding that it has allowed him to “broaden [his] horizons.”

When asked by Charlie to give a 60-second definition of managed futures, Mark focuses on the managed part, defining it as professional management of regulated derivatives contracts. “Alpha,” in the managed futures world, doesn’t refer to beating the S&P 500, but being uncorrelated with it. Charlie says non-correlation is “more important now than ever these days after a 7-8 bull run,” and that “in a bear market, the only thing that goes up is correlation.”

Isolating and Capturing Dividend Growth With Ryan Ballantyne

In this episode of Strategic Investor Radio, host Charlie Wright interviews Ryan Ballantyne of Reality Shares, a San Diego-based asset management firm focused on dividends. Reality Shares issued its first ETF in December 2014 and won ETF.com’s Best New ETF Issuer award the following year. The firm also provides free ratings for 1,200 dividend-paying stocks at its website.

Mr. Ballantyne says he used to be a trader, but he sleeps much better at night since switching his focus to dividends. Dividends are real, he insists, adding “you can’t fake a dividend.” Regardless of who wins the presidential election or whatever else happens, Apple’s dividend policy is unlikely to be affected, according to Ballantyne. He also points out that companies like Coca-Cola, Procter & Gamble, and Johnson & Johnson didn’t cut their dividends in the wake of the financial crisis; and recent dividend hikes by Qualcomm and Home Depot have been enough to offset dividend cuts by energy firms in the S&P 500.

Inside Managed Futures With Roland Austrup

Roland Austrup is CEO and CIO of Integrated Managed Futures (“IMFC”) and the longest-standing CTA in the Canadian marketplace. In this episode of Strategic Investor Radio, host Charlie Wright interviews Mr. Austrup, who explains the advantages of adding managed futures to an investment portfolio.

Mr. Austrup explains that the strategy involves investing across multiple asset classes – commodities, currencies, and financial indices – through the futures market. His firm, IMFC, uses quantitative analysis to select long and/or short positions across those asset classes based on value, momentum, and yield. He says his specialty is assessing those characteristics in underlying markets.

Seizing Tectonic Shifts in Real Estate With Gary Carmell

Gary Carmell is the President of CWS Capital Partners, a real estate investment and management company with more than $3 billion under management. He’s also the author of The Philosophical Investor: Transforming Wisdom into Wealth. In this episode of Strategic Investor Radio, host Charlie Wright interviews Mr. Carmell about his business, his book, and his admiration for a pair of seemingly disparate philosophers: Arthur Schopenhauer and Charlie Munger.

New Book - "Regulation A+, How the Jobs Act Creates Opportunities for Entrepreneurs and Investors"

Rob Kaplan, an attorney in Richmond, VA, is co-author of this book, focusing on the new opportunities created by the Jobs Act of 2012. While the most high profile aspect of this law is "Crowd Funding" there are aspects of this law that opened channels of opportunity for entrepreners, investors and investment companies in ways impossible under previous law and regulations.  Rob was instrumental in working with legislators to understand and craft legislation that would create such opportunities.  Listen to this interview to better understand these new opportunities and why they are expected to change the landscape and methods of how many investments are offered to the public.

Closed End Funds and Business Development Companies

John Cole Scott, a previous guest about a year ago, provides an update on Closed End Funds and discusses Business Development Companies (BDC's).  He discusses the CEF world, about 600 funds managing about $300 Billion in total assets, and sell at a discount or premium to NAV.  BDC's focus on venture loans to private companies for growth capital.  There are about 50 BDC's, many of which also have signficant institutional investors in their institutional funds.  Both of these investments generate significant yield.  For example, many BDC's pay double digit yields today, which is not often attainable in fixed income investments today.  Investors and advisors will find this interview to be very interesting.

Anfield Capital

Listen to David Young, founder and CEO. Following years of experience  at PIMCO, they focus on allocation by RISK, as opposed to allocation by ASSET CLASS.  This approach of "...starting at the finish line," is not traditional in the industry and requires some reverse engineering when compared to the more traditional allocation by asset class. He explains their unique methodology of managing both equities and fixed income.  David also offers lots of insights and opinions re: the current financial environment.  Any investor should enjoy this interview.

Shopoff Realty Investments

Bill Shopoff, founder of Shopoff Realty Investments over 25 years ago, tells about the world of real estate investing for investors.  Shopoff currently focuses on office buildings, industrial, retail and residential land entitlement.  He discusses the Uptown Newport Project (residential and support retail) and how it is developing.  A fan of the famed investor Warren Buffet, Bill discusses value investing in real estate, searching for good value in good projects, looking to purchase value at a good price.  Bill discusses a variety of subjects that would be of significant interest to any real estate investor.  Bill is knowledgable, articulate and has an interesting way of discussing this most important subject for most investors.

"Hedge Fund Investing" by Kevin Mirabile

Listen to Kevin, author of the book “Hedge Fund Investing,” as he discusses the Hedge Fund industry, its 10,000 funds, history and where it is today.  Kevin discusses the types of strategies and funds and how to evaluate Hedge Funds.  He discusses some of the mutual funds (called liquid alternative investments) that come from Hedge Fund firms, a relatively new phenomenon.  He covers the various strategies of Hedge funds, how these strategies actually reduce risk and volatility and how to evaluate Hedge Funds. This is an excellent summary of Hedge funds and their strategies for anyone interested in the investment world.

TheWizard.com

Gene Stunkel, creator and founder of The Wizard, discusses this robust market and stock analysis system.  The Wizard is an algorithmic based trend following system that provides signals and trade targets for markets, stocks, ETF’s, Futures Market commodities, and forex.  It scans for stocks, etc. and shows what is trending up, down, or in a consolidating mode.  Analysis includes the Sector and Industry of each stock and provides signals for each of them.  Any investor or Adviser would find this interview to be very interesting and helpful.

Faircap Partners

Listen to James Song discuss his passion and purpose in investing in Myanmar (formerly the country of Burma).  James is a former Harvard trained scientist/researcher, Fullbright Scholar studying and working in London and Uganda who became a successful Hedge Fund Manager for Biotechnology Funds and who has transitioned to investment opportunities in Myanmar - A place that he calls the world's most inefficient market. Catch a portion of his vision and passion for this undertaking, and the financial and altruistic opportunities it presents for investors.

OptionSellers.com

Listen to James Cordier, founder and CEO, discuss their strategies for selling options on the Futures Market.  Author of “The Complete Guide to Options Selling” and “Option Selling on Steroids” James offers a unique way to invest thru selling deep out of the money puts and calls on commodities, metals, etc.  This is indeed fascinating and anyone interested in options investing conservatively will enjoy this.

Charles Nenner Research

David Gurwitz, Managing Director of Charles Nenner Research, discusses their system for prognosticating markets and price targets thru cycles.  They analyze various markets and estimate where they are going in the near and further future.  They base their research and recommendations  thru cycles in various markets.  Ever interesting, David discusses the various elements that go into their determination of where markets are headed.  This is very interesting stuff for any investor.

HedgeCoVest

Listen to Evan Rapoport discuss this unique way to invest in Hedge Funds. There are thousands of Hedge Funds intended to offer investment strategies to mitigate risk thru a variety of sophisticated methodologies. Yet, their high minimums, lack of liquidity, lack of transparency and other barriers have made Hedge Funds unavailable to the individual investor with less than millions to invest. HedgeCoVest has created a portal thru which individuals with limited funds are able to evaluate and invest in Hedge Funds while having transparency and daily liquidity. Unique in the marketplace, HedgeCoVest opens doors to dozens of Hedge Funds that are otherwise closed to most investors. Investors will like to hear about this innovative service.

KraneShares

Brendan Ahern of KraneShares discusses the often under reported aspects of China's economy, urbanization of China, currency issues, the re-composition of the MSCI Index and other aspects of investing in China. He discusses the coming MSCI Index re-composition which will include dozens of additional Chinese companies being added to the Index, and he believes will result in the purchase of shares of these newly added companies. This has been a greatly under reported story that investors will find to be very interesting. Brendan makes a compelling case for the future of China and its economy.

Freedom Capital Investment Management

Mindy McClure, the Co-Founder and Managing Principal of Freedom Capital Investment Management, explains that the goal and purpose of Freedom Capital’s fund, which is a Business Development Company (BDC), is to invest in companies that promote prosperity, security and freedom in the U.S. Some of the industries that they focus on are those that promote agricultural independence, energy independence, job growth in the U.S., etc. This short interview introduces this most unique BDC and investors will find it to be very interesting.

President of ADISA

Thomas Voekler, Managing Partner of KVCF law firm in Richmond, Virginia, and current President of ADISA, discusses ADISA and the opportunities for the small investor in the direct investment marketplace. He also discusses Regulation "A" of the Jobs Act of 2012, and the opportunities it will offer to investors.

Arent Fox

Listen to Deborah Froling, attorney with Arent Fox in Washington D.C., discuss the legal environment of the Direct Investment industry. Deborah is a former SEC attorney and discusses the changing world of regulation in the direct investment industry. This interview was taken at the annual ADISA conference.

Bluerock Capital Management

Listen to Paul Dunn describe the rather unique real estate investment opportunities that Bluerock offers. Bluerock is an institutional real estate firm that develops, buys and manages large real estate projects in major U.S. cities. These types of properties are typically owned by institutional investors (pension funds, endowments, etc.) and Bluerock makes them available to the private investor thru their funds. They offer these institutional quality investments thru mutual funds as well as private placement projects with large investors with specific goals. Investors looking for institutional quality real estate with a track record of very low volatility will find this interview to be very interesting.

Note that past performance is not indicative of future performance. As of the date of this interview (December 11, 2015), Partnervest Advisory Services, LLC nor any of its clients held shares of Bluerock’s mutual fund, TIPRX.

Alternative Direct Investment Securities Assoc (ADISA)

Tony Grego, Director of Business Development for ADISA discusses ADISA and the benefits and opportunities it offers.

Peter Rucchiuti, Tulane University

A professor at Tulane University, Peter established the Burkenroad Reports, a twenty-two year old program, where the students visit and evaluate small companies located in the south, with the reports being published for investors.  Peter was a speaker at the ADISA Conference and has a very interesting interview.

Please note that at the time of this interview, Partnervest Advisory Services, LLC did provide advisory services to an account that included a holding in the HHBUX fund referenced within this interview.  This interview is not an offer to sell, nor an endorsement of, the fund.

Preferred Apartment Communities

John Isakson discusses the environment for opportunities in the  apartment communities investing.  PAC is a publicly traded REIT (Real Estate Investment Trust) that operates apartment complexes throughout the country.  He makes a strong case for the need for the productive acquisition and management of such properties today.

Please note that at the time of this interview, Partnervest Advisory Services, LLC did not provide advisory services to any accounts that included a holding in the PAC fund referenced within this interview.  This interview is not an offer to sell, nor an endorsement of, the fund.