A Reversion To Normalcy? This Fund Is Looking Back At Basics To See What The Market May Do Next

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You would’ve needed a crystal ball to predict that retail traders would cost hedge funds more than $13 billion in 2020.

Following a once-in-a-decade sort of situation, retail traders squeezed short-sellers out of their Gamestop Corp. GME, AMC Entertainment Holdings Inc. AMC, and Bed Bath & Beyond Inc. BBBY positions, sending prices to unprecedented highs in an extraordinarily short period of time. The Meme Stock Trend, as it was called, continued onto other candidates: Blackberry Ltd. BB, Wendy’s Co. WEN and even Tilray Inc. TLRY experienced a retail-led short squeeze, and Wall Street’s biggest shorters continued to bleed. 

As 2022 begins, the mania and cult like admiration for short-squeezing has seemingly begun to subside, and all but Gamestop have failed to return to pre-squeeze price levels. However, the idea of investing in companies due to other players, and not because of fundamentals or other indicators arguably lingers today.

To TrueMark Investments, this is a tricky approach to the investment practice. The exchange-traded fund (ETF) manager believes there are opportunities for capturing alpha – excess market returns – in sectors, but this is best achieved through a methodical, research-intensive, and fundamental approach. 

“Long-term decisions are derived by identifying disruptive industries in the New Economy and then further limiting our investment universe to a field of companies with a secular tailwind,” TrueMark writes. 

The TrueMark Approach?

TrueMark states that its investment philosophy revolves around four key pillars: 

• Idea sourcing:

The universe of potential companies is initially dictated by focuses on burgeoning, nascent asset classes. Developments in artificial intelligence (AI), and socially responsible investing are just some of the spaces TrueMark has identified as potentially disruptive. 

• Experienced research:

TrueMark pairs highly credentialed, experienced, and industry-specific portfolio managers with deeply knowledgeable Industry advisers. It believes this creates investment teams with the knowledge and reach to understand what is happening in these quickly evolving industries in real-time.  

• Concentrated portfolio construction:

TrueMark portfolios are specifically designed to capture the potential alpha of a secular growth story. Relying on its research process, the company’s goal is to choose the winners and avoid the losers in each of the industries it invests in, and in doing so, potentially deliver better long-term results to investors.

• Always monitoring:

Management team changes, reversals in competitive imbalances, the addition or subtraction of a major financial partner, and systemic valuation adjustments. These are all realistic scenarios in New Economy industries. With this in mind, TrueMark’s goal is to have its teams continuously monitor its portfolio holdings, their respective industries, and the broader market to help ensure that it continues to own the best-of-breed. 

One example of TrueMark’s philosophy could be found in the composition of its TrueShares Technology AI & Deep Learning ETF LRNZ. As a vehicle designed to target a nascent space, the ETF contains a concentrated portfolio of artificial intelligence companies with reportedly strong fundamental strengths. 

One of the top five holdings is CrowdStrike Holdings Inc. CRWD which has a three-year history of increasing total revenue. Another top-five holding is NVIDIA Corp. (NASDAQ: NVDA), which has increased revenue, net income, and earnings per share (EPS) throughout the last three years of operations. 

For more on the fund and its investment principles, click here. 

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.