One Word to Improve Your Investment Results

I thought I wanted to be an engineer... Before I ended up in accounting, I was always interested in processes and building things. But after a year of studying engineering, I realized it would be decades before I'd be allowed to design a plane's engine or anything else material. [Chaikin PowerFeed]( Editor's note: I (Marc Chaikin) am turning the PowerFeed over to Joel Litman today... [Regular readers know]( that Joel is the founder and chief investment strategist at our corporate affiliate Altimetry. He's a college professor and certified public accountant, too. Most importantly, Joel is an expert in "forensic accounting." He has exposed dozens of companies for potential fraud over the years – many of which went bankrupt or became nearly worthless after his analysis. To that point, Joel realizes that sifting through a company's dense earnings report can be hard. But to make it easier, he believes every investor should look for one thing... The following essay is adapted from a February issue of the free Altimetry Daily Authority e-letter. In it, Joel explains why this key trait matters. Plus, he shares how businesses with these types of management teams can tell you a lot about their overall performance... One Word to Improve Your Investment Results By Joel Litman, chief investment strategist, Altimetry I thought I wanted to be an engineer... Before I ended up in accounting, I was always interested in processes and building things. But after a year of studying engineering, I realized it would be decades before I'd be allowed to design a plane's engine or anything else material. I knew I wanted to do something where I could impact the world sooner. So I shifted gears and schools... and began my accounting journey. I've never regretted it. However, it did mean I had to wait an extra two decades or so to meet Dave Daglio... Dave, like me, went to school to be an engineer... only he stuck around and graduated with an engineering degree. Eventually, he found himself working in finance, and we ended up working closely together. I believe our paths converged thanks to our shared interest in thinking about engineering and processes... and because of the importance we put on candor. Candor goes a long way in life. And as I'll explain today, for investors, it can even help determine whether you make money in the markets or not... Recommended Links: [December 6 Buy Alert: The '40x' Recession Trade]( ONE trade could've grown your money by 4,000% during the recessions of the past 40 years. It doesn't involve trading options, cryptocurrencies, or anything highly speculative. But according to two Wall Street legends, it could save your wealth in the early weeks of 2024. [Here's the No. 1 step to take with your money ahead of a recession](. [Gold Is Headed Above $3,000 (Here's How to Play It)]( With so many strange events happening across the economy (the longest bear market for bonds since the Civil War... unprecedented bank closures... and soaring prices), it's no wonder the richest investors are loading up on gold. But you might not realize there's a much better way to profit from rising gold prices – WITHOUT ever touching an ETF, mining stock, or even bullion. [Full details here](. Dave's mindset has led to an impressive investment career... Dave became an Altimetry client when he was managing money for the Boston Company, aka BoCo, which was one of the most respected fund-management firms in New England. He has won awards from AsianInvestor, Institutional Investor, Lipper, and Forbes with titles like Best Small-Cap Manager... Midcap Manager of the Year... Best Fund Over Three Years... Best Fund Over Five Years... and a place on Forbes' list of Top 20 Investors. In fact, Dave's track record is so strong that when BoCo merged with the trillion-dollar manager BNY Mellon, management tapped him to become its chief investment officer. How did Dave achieve this success? A core part of it was the engineer in him. He wanted to make his investing triumphs reproducible. So when he launched his own fund company, he named it after a well-known process in aviation known as "BC-GUMPS." This is a popular mnemonic device for landing a plane safely. It gives pilots an easy way to remember to check the controls, instruments, gas, landing gear, and other items to ensure they're not forgotten. Dave has a checklist for investing, too. He makes sure he knows the financials cold. And part of his process lines up with our work in another crucial way. It's an idea at the center of one of my favorite mantras, "incentives dictate behavior." Once again, I'm talking about candor... For investors, candor means looking for management teams who communicate to shareholders openly, honestly, and regularly. Too often, management teams speak with fact-deficient, obfuscating generalities, aka "FOG" – a term coined by author and financial strategist L.J. Rittenhouse. These managers hide their real thoughts – and not just because they're worried about protecting competitive advantages. FOG-filled communications often reflect managers who can't be trusted or don't know what's going on in their own business. We want the opposite. We want management teams with nothing to hide and who want to work with shareholders. When management teams are open and honest, it represents a stronger foundation for all the other decisions they make. And when they don't sugarcoat a down quarter or a down year, it ensures investors that they're focused on the long term. Candor also leads to more than just trust. The data shows these management teams are more likely to perform well over the long term... For years, Rittenhouse published an annual report that ranked companies based on candor. The Rittenhouse Rankings Candor Analytics Survey used public communications (like shareholder letters and quarterly earnings calls) to see how management communicates. In 2016, the survey reported that companies with the most candid management teams outperformed the S&P 500 Index over time. So if you're going to do research to choose individual stocks, you've got to make candor a part of your research checklist. That starts with paying attention to earnings calls... Don't just read the transcripts. Actually listen to the calls. The same thing goes for television interviews, quarterly webcasts, U.S. Securities and Exchange Commission filings, and other forms of communication. You should look for management teams that take their lumps when they make mistakes... and leaders who can clearly explain what the company is doing and the metrics they judge themselves on. On the other hand, watch out for FOG. Good tells are when management uses a lot of jargon... when management focuses on their industry and macro factors as opposed to their own strategy and execution... or when they just say a lot of "nothing at all." They can sound good to the untrained ear. They can also come loaded with downside risk for investors. Prioritizing communicative management teams will help you invest in companies that are thinking about the long term. More important, it might help you avoid companies that are hiding an unforeseen risk. So remember... if management speaks consistently and with candor, that's a good thing. It's a sign that you're less likely to encounter risks or surprises down the road. Regards, Joel Litman Editor's note: I (Marc Chaikin) am teaming up with Joel for a special event next week... Put simply, your wealth could be in jeopardy. If you're hoping for things to "get back to normal" in 2024, you could be painfully blindsided in the early days of the new year. That's why Joel and I are stepping forward next Wednesday, December 6. We'll show you exactly how to prepare your money before the Federal Reserve makes its next move. The action starts promptly at 8 p.m. Eastern time. And as a "thank you" for anyone who shows up, we're planning to share four free recommendations. [Get all the details here](. Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 +1.460% 11 15 4 S&P 500 +0.390% 157 254 86 Nasdaq -0.250% 41 47 11 Small Caps +0.340% 535 960 429 Bonds -1.160% Health Care +1.260% 12 34 17 — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain somewhat Bullish. Major indexes are mixed. * * * * Sector Tracker Sector movement over the last 5 days Real Estate +2.90% Materials +2.03% Financial +1.70% Industrials +0.91% Staples +0.73% Health Care +0.67% Discretionary +0.42% Utilities +0.37% Information Technology +0.19% Energy -0.05% Communication -2.01% * * * * Industry Focus Retail Services 19 40 19 Over the past 6 months, the Retail subsector (XRT) has outperformed the S&P 500 by +2.00%. Its Power Bar ratio which measures future potential is Neutral, with an equal number of Bullish and Bearish stocks. It is currently ranked #12 of 21 subsectors and has moved up 2 slots over the past week. Indicative Stocks [rating] DLTR Dollar Tree, Inc. [rating] DG Dollar General Corpo [rating] EYE National Vision Hold * * * * Top Movers Gainers [rating] CRM +9.36% [rating] PSX +5.46% [rating] DFS +4.62% [rating] CNC +4.54% [rating] MOH +4.20% Losers [rating] F -3.12% [rating] WBD -3.06% [rating] NVDA -2.85% [rating] VFC -2.34% [rating] AMD -2.17% * * * * Earnings Report Reporting Today Rating Before Open After Close AAPL No earnings reporting today. Earnings Surprises [rating] KR The Kroger Co. Q3 $0.95 Beat by $0.03 [rating] MRVL Marvell Technology, Inc. Q3 $0.41 Beat by $0.01 [rating] ULTA Ulta Beauty, Inc. Q3 $5.07 Beat by $0.10 * * * * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, [click here](. You’re receiving this e-mail at {EMAIL}. For questions about your account or to speak with customer service, call [+1 (877) 697-6783 (U.S.)](tel:18776976783), 9 a.m. - 5 p.m. Eastern time or e-mail info@chaikinanalytics.com. Please note: The law prohibits us from giving personalized investment advice. © 2023 Chaikin Analytics, LLC. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Chaikin Analytics, LLC. 201 King Of Prussia Rd., Suite 650, Radnor, PA 19087. [www.chaikinanalytics.com.]( Any brokers mentioned constitute a partial list of available brokers and is for your information only. Chaikin Analytics, LLC, does not recommend or endorse any brokers, dealers, or investment advisors. Chaikin Analytics forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Chaikin Analytics, LLC (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.