The Midas Touch

Grail Securities (Switzerland) is a research and advisory entity, specializing in the U.S. equity market, and monitors over 10,550 listed companies.?

Stock markets have always sought an almost mystical algorithm, which some have called the ‘Holy Grail of investing’. Its origins probably stem from the legend of King Midas of Phrygia, whom the Gods granted his wish to turn everything he touched into gold.

Today we interpret ‘the Midas touch’ as simply an ideal to strive for in our competitive lives that only the very few are able to reach.

In this context, the following graph of the consolidation of eight Grail portfolios is testimony to the unique methodologies that enable the Grail Equity Management System (GEMS) to outperform the best U.S. mutual funds, whether offered by Morgan Stanley, Goldman Sachs, Blackrock, or by any other provider in terms risk and return.

It is worthy to note that the portfolio's 500 stocks outperform with a performance 182.0% the S&P 500 gain of 67.9% by 114.1%.

These four portfolios, which were constructed at the beginning of this year, are producing outstanding results, resoundingly beating the S&P 500, which currently is up 22.83%.

This table of top U.S. growth funds show that they do not outperform the four Grail portfolios.

One of the tenets of the conventional investing mantra is that the higher returns the greater the risks are.

If a naive investor randomly picks a number of stocks with little or next to no knowledge of them or the market, he is taking a blind gamble. To make matters worse, if, unknown to him, there is a bear market raging, it would be highly probable that his portfolio will immediately suffer devastating losses in the short– to mid-term.

On the other hand, an experienced investor is bound to only take long positions in a bull market, thereby making his purchases in accordance with his competencies. Thus, the greater his expertise, the greater his returns will be. His ‘Midas Touch’ is based on his ability to read the market’s ‘tea leaves’ right down to the last leaf, or company, he selects.

This argues that it is purely the level of expertise and a person’s biases that create risk return differentials, and not an insipid assumption that higher returns per se are the cause of greater risks.

This graph shows that there exists a risk return continuum based on the blend of both knowledge and preferences.

The key to successful investment is based on the quality of the evaluation conducted. There are many stock market participants who have problems in managing change and their results are reflected at the lower end of Grail's model. But there are others who recognize that diligent analysis and continuous learning are key to the competitive success of the financial species, as Charles Darwin so rightfully had observed.

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