Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Cross Asset Strategy

We normally only give seasonality secondary consideration in our analysis. But April is the most bullish month of the year for the S&amp;P 500 in the last 20 years and positive 80% of the time. Combined with the recent healthy internal rotation in the market, and if seasonality continues to track, the stock market should grind higher for the remainder of the month.We conclude from our analysis that the market can continue to rise in April. A healthy internal rotation has occurred that has relieved the pressure of overbought excesses. Several potential opportunities have arisen as a result of the market rotation:<ul>
<li>A opportunity to lighten up on growth stocks;</li>
<li>A opportunity to buy into value stocks;</li>
<li>A bond market rally; and</li>
<li>A possible bullish set-up for gold and gold stocks.</li>
</ul>

We normally only give seasonality secondary consideration in our analysis. But April is the most bullish month of the year for the S&amp;P 500 in the last 20 years and positive 80% of the time. Combined with the recent healthy internal rotation in the market, and if seasonality continues to track, the stock market should grind higher for the remainder of the month.We conclude from our analysis that the market can continue to rise in April. A healthy internal rotation has occurred that has relieved the pressure of overbought excesses. Several potential opportunities have arisen as a result of the market rotation:
A opportunity to lighten up on growth stocks;
A opportunity to buy into value stocks;
A bond market rally; and
A possible bullish set-up for gold and gold stocks.


Internal Rotation + Seasonality = Higher S&P 500

Technology augmented investing

Lazarus Goh

Augmenting fundamental investing with technology

Open Diligence

We aim to a) increase the efficacy of investment processes with technology and b) utilize alternative data to gain an additional perspective on equity names

Globally, we add 51 billion tons of greenhouse gases to the atmosphere every year.Manufacturing contributes to 31% of the above - including the production of steel, cement and clothes (containing plastic) that we wear. A ton of cement produces a ton of carbon dioxide; a ton of steel produces 1.8 tons of carbon dioxide; and a ton of plastic produces 1.3 tons of carbon dioxide.The only path to keep building/manufacturing and yet not contribute to greenhouse gases is through the advancing of carbon capture technologies.

Globally, we add 51 billion tons of greenhouse gases to the atmosphere every year.Manufacturing contributes to 31% of the above - including the production of steel, cement and clothes (containing plastic) that we wear. A ton of cement produces a ton of carbon dioxide; a ton of steel produces 1.8 tons of carbon dioxide; and a ton of plastic produces 1.3 tons of carbon dioxide.The only path to keep building/manufacturing and yet not contribute to greenhouse gases is through the advancing of carbon capture technologies.

Finding "Carbon Capture" Technologies in Publicly Listed Companies

The fiscal and monetary authorities of the developed world are engaged in a great macroeconomic experiment. Governments are spending enormous sums to combat the recessionary effects of the pandemic and central banks are allowing monetary policy to stay loose in order to accommodate the fiscal stimulus. Eventually, inflation and inflation expectations are bound to rise.Here is what that means for investor portfolios. We recently highlighted a relationship from a Credit Suisse chart indicating that 50/50 balanced fund drawdowns rise during periods when stock-bond correlations are high (see <a href="https://www.smartkarma.com/insights/are-you-prepared-for-the-post-great-rotation-era" target="_blank" rel="noopener">Are You Positioned for the Post-Great Rotation Era?</a>). How can balanced fund investors build resilient portfolios to control risk and enhance returns during such periods?We conducted an asset return study and analyzed the returns of different asset classes when inflation expectations were rising and falling. While the data is somewhat limited and the conclusions only represent an inexact roadmap, we conclude that a 60% stock, 30% inflation-index bond and 10% commodity allocation is a reasonable starting point in thinking about a replacement for the conventional 60/40 portfolio during a period of rising inflation expectations.

The fiscal and monetary authorities of the developed world are engaged in a great macroeconomic experiment. Governments are spending enormous sums to combat the recessionary effects of the pandemic and central banks are allowing monetary policy to stay loose in order to accommodate the fiscal stimulus. Eventually, inflation and inflation expectations are bound to rise.Here is what that means for investor portfolios. We recently highlighted a relationship from a Credit Suisse chart indicating that 50/50 balanced fund drawdowns rise during periods when stock-bond correlations are high (see Are You Positioned for the Post-Great Rotation Era?). How can balanced fund investors build resilient portfolios to control risk and enhance returns during such periods?We conducted an asset return study and analyzed the returns of different asset classes when inflation expectations were rising and falling. While the data is somewhat limited and the conclusions only represent an inexact roadmap, we conclude that a 60% stock, 30% inflation-index bond and 10% commodity allocation is a reasonable starting point in thinking about a replacement for the conventional 60/40 portfolio during a period of rising inflation expectations.

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Equity Bottom-Up

<ul>
<li>The percentage of US active funds invested in Tesla has risen sharply over the course of the year.  A total of 18%, or 88 out of the 496 funds in our US analysis hold a position in Telsa.  Average fund weights across all funds is 0.42%, across Telsa holders is 2.34%.  </li>
<li>Total dollar holdings are at peak levels among the funds in our analysis, with combined AUM in <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> of $37.6bn among the 88 holders.  </li>
<li>Current holders have tended to sell in to strength this year, with $4.4bn in outflows as managers keep Telsa from dominating portfolios if left unchecked.</li>
<li>At current levels, <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> will join the ranks as one of the top underweight holdings among active US managers, currently led by <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a> and <a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft Corp (MSFT US)</a> .  If no further buying occurs, Tesla will likely slot in to 4th place behind <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US</a> (assuming an inclusion weight of ~1.5%).</li>
<li>We expect buying pressure from benchmark aligned funds who are currently not invested in the stock.  Estimates of $5.8bn when analysing previous index inclusions <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> and <a href="https://www.smartkarma.com/entities/berkshire-hathaway-inc-cl-b" target="_blank" data-smartkarma-citation="entities:8635:1" rel="noopener">Berkshire Hathaway Inc Cl B (BRK/B US)</a> .</li>
<li>Potential $37bn of selling from active US funds, though current holders are long-term holders and not guaranteed to sell in to the rebalance.  We see an imbalance of buying from passive funds who may need to push prices significantly higher to entice these long-term holders to sell.</li>
</ul>Analysis taken from our US research, covering 496 active US equity funds with a combined AUM of $3.4tr.


The percentage of US active funds invested in Tesla has risen sharply over the course of the year.  A total of 18%, or 88 out of the 496 funds in our US analysis hold a position in Telsa.  Average fund weights across all funds is 0.42%, across Telsa holders is 2.34%.  
Total dollar holdings are at peak levels among the funds in our analysis, with combined AUM in Tesla Motors (TSLA US) of $37.6bn among the 88 holders.  
Current holders have tended to sell in to strength this year, with $4.4bn in outflows as managers keep Telsa from dominating portfolios if left unchecked.
At current levels, Tesla Motors (TSLA US) will join the ranks as one of the top underweight holdings among active US managers, currently led by Apple Inc (AAPL US) and Microsoft Corp (MSFT US) .  If no further buying occurs, Tesla will likely slot in to 4th place behind Amazon.com Inc (AMZN US (assuming an inclusion weight of ~1.5%).
We expect buying pressure from benchmark aligned funds who are currently not invested in the stock.  Estimates of $5.8bn when analysing previous index inclusions Facebook Inc A (FB US) and Berkshire Hathaway Inc Cl B (BRK/B US) .
Potential $37bn of selling from active US funds, though current holders are long-term holders and not guaranteed to sell in to the rebalance.  We see an imbalance of buying from passive funds who may need to push prices significantly higher to entice these long-term holders to sell.
Analysis taken from our US research, covering 496 active US equity funds with a combined AUM of $3.4tr.

Tesla Inclusion.  What Will Active US Funds Do?

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

<ul>
<li>Data from ~30 million participants in the Chase credit card panel (US) has shown a pullback in spending in recent weeks</li>
<li>The pullback appears to be independent of mobility dynamics, as in-person shopping outperformed overall spending</li>
<li>We text-mine the media for first-person accounts of hardship to find an increase in reported layoffs &amp; reduced personal spending, but the magnitude of increase has been encouragingly small (&lt;1x STDEV) so far relative to readings seen in H1</li>
<li>As we highlighted in <a href="https://www.smartkarma.com/insights/tmi-snapshots-quantifying-relative-sector-sentiment-in-the-recent-rotation-via-text-mining" target="_blank" data-smartkarma-citation="insights:45278" rel="noopener">TMI Snapshots: Quantifying Relative Sector Sentiment in the Recent Rotation Via Text Mining</a>, the cyclical rotation is alive and well on mid-term vaccine-driven recovery expectations; but the potential for vol around year-end funding or seasonal dynamics may be amplified by these weak Q4 trends once they appear in official macro releases</li>
</ul>


Data from ~30 million participants in the Chase credit card panel (US) has shown a pullback in spending in recent weeks
The pullback appears to be independent of mobility dynamics, as in-person shopping outperformed overall spending
We text-mine the media for first-person accounts of hardship to find an increase in reported layoffs &amp; reduced personal spending, but the magnitude of increase has been encouragingly small (&lt;1x STDEV) so far relative to readings seen in H1
As we highlighted in TMI Snapshots: Quantifying Relative Sector Sentiment in the Recent Rotation Via Text Mining, the cyclical rotation is alive and well on mid-term vaccine-driven recovery expectations; but the potential for vol around year-end funding or seasonal dynamics may be amplified by these weak Q4 trends once they appear in official macro releases


TMI Snapshot: High-Freq US Spending Data Pullback Looks Independent of Mobility, But Is It Relevant?

United States

SPDR S&P 500 ETF Trust is an exchange-traded fund incorporated in the USA. The ETF tracks the S&P 500 Index. The Trust consists of a portfolio representing all 500 stocks in the S&P 500 Index. It holds predominantly large-cap U.S. stocks. This ETF is structured as a Unit Investment Trust and pays dividends on a quarterly basis. The holdings are weighted by market capitalization.

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SPDR S&P 500 (SPY US)

Internal Rotation + Seasonality = Higher S&P 500

Combined with the recent healthy internal rotation in the market, and if seasonality continues to track, the U.S. stock market should grind higher...

Cam Hui

Finding "Carbon Capture" Technologies in Publicly Listed Companies

We programmatically ran through filings of all US and HK listed entities in search for companies that have an angle to carbon capture technologies

Lazarus Goh

60/40 Resilience in An Inflation Age

As inflation expectations rise, the fixed-income portion of the 60/40 balanced fund model is under threat. How should balanced fund investors react...

Cam Hui

Tesla Inclusion. What Will Active US Funds Do?

What are the current levels of ownership in Tesla Motors? We analyse 496 US active funds with a combined AUM of $3.4tr to find out.

Steven Holden

TMI Snapshot: High-Freq US Spending Data Pullback Looks Independent of Mobility, But Is It Relevant?

Chase US card spending data has pulled back in recent weeks, and our own text-mined data has seen a mild increase in reported financial hardship. ...

Elan Gore

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