On our publications page is a document introducing the Magpie Hypothesis which represents the analysis of the trading activities of a collection of primarily European investment firms over the past five years and more. It turns out that by monitoring their investment activities in relation to constituents of the S&P 500 Index that a series of best ideas scenarios can be statistically identified that form a notional portfolio that will outperform the index.
How to evaluate the striking performance of this statistical analysis remains an open question? What value to place on it is another more tangible question? What is clear is the data speaks for itself with cumulative significant outperformance of the S&P 500 Index. On a year by year basis it has beaten the index. Backtested to 2011, the process has produced such positive results.
It is not uncommon for amateur and professional investors to pinch or borrow - as a Magpie would - the best ideas of other investors, and with some success. Why do the hard work of identifying potential investment ideas when major investment firms around the globe have highly experienced teams doing likewise. Why not ride on their backs? The upside to this is that you may well identify winners, but the downside is that even the best of the best investment firms tend towards average performance over the long-term. And then there is deciding which of their best ideas to select.
Magpie is different because it represents a simple evaluation process with no value judgements required on the merits of one idea over another. Magpie represents the accumulation of relevant data and the individual Magpie strategies, one through four, reflect different criteria applied to the data output. There is no human decision making. And the results have been impressive.
Check out Magpie and reach out if you would be interested in following its progress.