KhronoStock Macro Investment Process

KhronoStock’s comprehensive macro-investment approach begins with the identification of broad negative and positive global macro economic trends. These broad trends are then categorized according to industry sectors, asset types and locations.

For individual industry sectors, valuation metrics such as dividend yield, P/E, growth rate and profitability measures are used to separate healthy global industry sectors from the weak ones. For asset classes such as commodities, important global economic research reports and indicators are used to project the performance of these asset classes. Stock market sentiment indicators are important to identify possible market reversals and trend changes. Major sentiment indicators such as VIX, put/call ratio, technical analysis and AAII investor sentiment index are used for such analysis.

To implement KhronoStock’s macro investment views, a wide range of leveraged long and short macro based ETFs are used. These ETFs are actively traded according to industry sector, asset class and market sentiment signals generated through KhronoStock’s investment process to produce optimal returns.

The Uniqueness of Short-Stocks’ Equity Strategy

There is a “huge” difference between Short-Stocks’ equity investment strategy and that of most hedge funds and mutual funds. Most investment managers research a company first, and then look for an entry point. We take the exact opposite approach.  Our software scans for stock prices that moved significantly higher or lower, and as a result may be over-valued and we short it, or under-valued and we buy it. 

Objective and Track Record

The objective of Short-Stocks.com is to achieve maximum capital appreciation by taking advantage of stocks that are inefficiently priced.  “Inefficiently” priced refers to a company whose stock price has had a very rapid rise or fall and has become either over-valued or under-valued when compared to the future fundamentals of that company.   

A proprietary software filtering system is used to search for inefficiently priced stocks, in real time, during stock market hours. The software identifies companies whose stock prices meet certain conditions that have been identified.  Short-Stocks.com seeks short term capital appreciation. So far, in 2008, the average gain per position of Short-Stocks.com closed recommendations was 20.2%. The average holding period was roughly two weeks. The fund’s software typically identifies four to six day trades a day. On average 90% of the day trades are profitable.   

Illustration of Short-Stocks’ Investment Process

The proprietary software alerts Short-Stocks when a stock price has appreciated by more than 50% in 5 days, when a company’s stock price has appreciated more than the last “inefficient” move, when a stock has appreciated by a significant amount for 7 days in a row, when the relative strength and volume have peaked, etc. 

After the software identifies these companies a VALUATION FORMULA is used to see if the investments offer either an attractive short sale position or long position.  The fundamental analysis process will include Wall Street analyst information, comparing a company’s stock price to growth rate, PEG valuations, market capitalization –vs.- revenues, moving averages, insider and institutional selling/buying and relative strength models.  The fund will only short a stock that is inefficiently priced and is trading at valuations that are excessive to the fundamentals.  On the long side the fund will only invest in companies that are trading at a significant discount to their fundamentals. A significant portion of the investments will be made in mid-cap companies that are valued at $500 million to $ 2 Billion in value.