Major Move Happening in This Sector in March

"Follow the trend lines, not the headlines."

-Bill Clinton

Headlines provide great information on the current conditions of a company. Good and bad news, or important events can drive extreme moves in a stock price in the short term. The problem is, everyone is able to consume the same information at the same time and nowadays it is difficult to get any edge with information flow.

More importantly, what headlines don’t tell us is how the market will typically digest this information and what it means for the direction of the stock price in the medium and long term. Price trends however do contain valuable information to answer these questions. They have traditionally been used more widely to understand short term price movements, but not as effectively in the medium and long term. We feel this represents a huge opportunity for investors, and EidoSearch is using innovative technology and bringing the necessary validation to help fundamental investors to exploit this information across all time horizons.

Most investors look at price charts to see how a stock is incorporating information and to form an opinion on the trajectory of a position and where it’s headed. The opinion formed, although often based on great experience, is subjective and therefore comes with an inherent bias.

EidoSearch takes the guess work and bias out of understanding the impact of a price trend and to help investors take advantage where a pattern contains valuable information. Through mathematics we rapidly find the most similar instances in history, from a peer group, to provide information about the range of probable outcomes in the future. We have validated the predictive nature and information contained in this approach through millions of predictions over 10 years, looking at horizons from 5 days to 6 months forward.

EidoSearch is providing investors with the ability to quantify the impact of price trends and merry that with their fundamental view to better gauge forward price forecasts and expected volatility no matter what the time horizon. This is impacting the profitability of our clients from idea generation, to portfolio monitoring and through to position adjustments and execution.

As an example of the power of our information service, we took a look at return and volatility forecasts at the Sector level to see if any compelling trends stood out. We found that when looking at 3 month price trends, that 20 of the 30 stocks with the most positive return probabilities (across all U.S. stocks) for the next 1 month are in Real Estate.

PennyMac Mortgate Investment Trust (PMT)

· 79.4% of the 97 similar instances in REIT stocks historically are up in the next 1 month
· The average 1 month return is 4.5%
· 85% probability the stock will be above a -1.2% drop in the next month (7.7x Upside/Downside)

1 month forward historical return distribution of this pattern in REIT’s

DCT Industrial Trust (DCT)

· 72.1% of the 61 similar instances in REIT stocks historically are up in the next 1 month
· The average 1 month return is 5.4%
· 85% probability the stock will be above a -0.8% drop in the next month (16.6x Upside/Downside)

1 month forward historical return distribution of this pattern in REIT’s

Dupont Fabros Technology Inc (DFT)

· 74.2% of the 97 similar instances in REIT stocks historically are up in the next 1 month
· The average 1 month return is 4.1%
· 85% probability the stock will be above a -1.2% drop in the next month (7.4x Upside/Downside)

1 month forward historical return distribution of this pattern in REIT’s

Please contact us if you’re interested in trends we might be picking up in the shorter term or longer term: info@eidosearch.com.

Have a great week.