It was fun this week.  I had prepared topics and it went pretty smoothly.  Interesting days in the markets, and good progress within the firm.

https://youtu.be/ObDA0CofsAk

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Jeffrey Cohen, President, US Advanced Computing Infrastructure, Inc.

"It was a dark and stormy night..."

NASDAQ was falling, long bond yields were screaming higher, the dollar was strengthening, and fintwit tears could have overflowed Lake Michigan.  People were scared of the market.  Bitcoin had fallen $10k per coin, and the meme stock aftermath (GME and AMC) was a shattered set of dreams for retail and hedgies alike. The other thing we noticed was that annual returns for our three market exchanges we use in our model were all over 20%, and one was 65%.  These are heady returns.

In other words, it was time for one of our clients to think about a balance of long and short positions.  Get to the safe spot where you make money purely on Alpha and not on Beta.  Check out our tab 'Market Questions & Data' for explanation of terms.

We were ready for the challenge and revised our original Chicago Quantum Net Score model (our quantum algorithm) to pick 'dogstars' or stocks that had exceptional volatility, without a sense of direction.  In other words, their volatility exceeded their expected market returns.

So, we did it.  We are now offering that service on our website for clients that want a set of stocks to look at not owning (or shorting, or buying puts).  So far, the results are pretty good.  Initially we see the stocks falling, but then recoveries happen.  We plan to watch these stocks for a few months and report on progress.

It did find a stock that is in real trouble...although we had to study the financials and bond covenants and amended agreements to find out how badly they were in pain.  They owe more than $80M to a sharp investment house in Jersey (no, not New Jersey) due March 31, 2021.  I cannot see a way out for them...and so the model has already had value for our client.

Check it out for yourself.  A big run is $750 (where we evaluate exchanges) and a small run (where you provide the tickers) is $150.  Until supplies last, we will buy and donate a box of Girl Scout cookies for each paid run.

You can call me, and I can walk you through the logic and math.  Contact info is in the 'Contact' tab.  This is pretty cool work.
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Jeffrey Cohen, Wed, March 3, 2021

First, thank you to our newest client for pointing this out on Monday.  We had not seen, nor understood it, and we are grateful for the feedback.

So, what is a dividend bias and how do you get it?  Is it contagious? Can you cure it?

What is it?  When we analyze stocks we use the adjusted close data.  It reduces the price of certain stocks that either paid a dividend or performed a stock split.  The bigger the dividend (as a % of the closing price), the larger the reduction in prices.  This reduces the BETA of the dividend paying stocks (more for larger dividends).

This means that for our efficient portfolios, we were picking fewer dividend paying stocks than we should have picked.  If we pick 'inefficient' portfolios, then those portfolios would have more dividend paying stocks than they should.

We found it because our client wondered why the proportion of dividend paying stocks was different than expected in our chosen portfolio.

You can cure it.  We just did (still in testing, but an exciting development).  We will be adjusting the expected return calculations by a dividend percentage adjustment.  This is not a perfect fix, as the math requires us to adjust both the variance and the expected return...but this should work well and be feasible to implement.

We will share more about this, and I can almost imagine this going into a future academic paper.  Let us know if you have questions.

Regards,
Jeffrey Cohen

Early in the development in the model, we noticed a unique stock pattern.  We found a stock, $WLL, that had increased in price overnight by an extremely high percentage.  As we looked into the matter, we saw that the company had exited Bankruptcy Court protection and the stock started to trade again under the same ticker symbol.  To avoid having the model evaluate this extraordinary price move, we decided to remove the ticker for a year after reorganization.

We recently ran a job for a client and found a second ticker, FTSI.  After that, we looked at about 50 companies that have either entered Chapter 11, or have emerged from bankruptcy and looked for other candidates for removal.  We found PG&E Corporation, which exited Chapter 11 on July 1, 2020.  The stock still trades under the same ticker symbol $PCG, and will be removed from our ticker list pulls.

If you know of other stocks which have retained the same ticker, and have started to trade on one of our supported exchanges, please let us know.

What we found was that most of the companies have moved to a status of 'private' and are no longer traded.  Others moved to the OTC market, or even the pink sheets/OTC, and those will not be analyzed.  One stock disappeared as the company was acquired.  And a few stocks appear as new stock tickers (and they won't pass the 1-year continuous trading validation).

Thank you for your support.
Jeffrey Cohen, President, US Advanced Computing Infrastructure, Inc.