Avoiding losers is as important to equity portfolio performance as holding winners, yet ‘downside risk forecasting’ receives little attention.
- Most equity analysts focus their research on upside potential and finding stocks to buy, so a ‘what could go wrong?’ perspective is often lacking. For example, brokerage firm analysts rarely issue ‘sell’ recommendations, and their few sell-rated stocks have historically outperformed.
- Equity risk is most commonly analyzed at the portfolio level in benchmark-relative terms. Stock-specific risk measures such as volatility, beta, or fundamental factor ‘exposures’ are inconsistent and fail to address a critical risk management goal: minimizing losses on individual portfolio positions.
Revelation Investment Research was founded to fill this research void. We believe the ability to systematically predict which stocks have the most (and least) downside risk would be extremely valuable for stock selection and risk management. Our Downside Risk Alert and REIT Forecaster services have that predictive power.