Formula Stocks specializes in buying wonderful businesses at an attractive price. You'd like a business that grows, in which the reward is asymmetrically larger than the risk. You want a good business model which is profitable, managed by people who act in your interest as a shareholder. A business that is financially sound and well funded, deliver honest returns, and offer you a good earnings yield. You get the picture, so in the interest of brevity we will omit the next 50 things which you would ideally also like to see in a business you invest in.
Many books have been written about how to invest in great businesses at an attractive price. There are a few such titles at the bottom of this page. However you don't need to read or understand them if you have met Joe.
Joe is an artificial intelligence with a diverse personality. He thinks like 25 of the best super investors such as Benjamin Graham, Philip Fisher, Warren Buffett, Jesse Livermore, to name a few.
Investing is all about the future. Artificial intelligence is particular adept at understanding what positively affects future investment returns. We spent 14 years training what you might call a neural network to think like the worlds best super investors. Why them? Because each of them brought unique insights to the table. Each understood something better than others, and by understanding all of them, we have trained Joe to look at a stock, and immediately tell us how "likable" it is from an investors perspective, as seen through many different lenses. This is what we call an AI-score. Joe is also capable of constantly scanning the entire universe of stocks, looking for the best deals. What would take 60 human investors working 8-16 a month to analyze, Joe now does in half an hour.
As human beings we have a lot of biases. Think of them as mental shortcuts our biological brain tends to make, in order to process complex data fast. Biases makes our brains fast, but also very, very imprecise. We estimate that which we do not know. This introduce many errors. Joe doesn't have biases, he does not need to approximate or generalize, or jump to conclusions based on incomplete knowledge as we do all the time, he calculates precisely, meticulously, with perfect memory and no limits to the complexity. As such he makes fewer errors than his human analyst counterparts prone to biases.
For that reason Joe can do certain things that a human investor could not accomplish. Not even a super investor, and as such Joe advances the field of investing. In order to bring Joe's expertise to the highest level, we have spent 14 calendar years meticulously teaching him, the same time a human teenager would require in order to learn how the world operates. For the record: Joe's world goes no further than investment excellence, he has no ego, or sense of self.
Lets look at an example simplified as much as possible, for brevity.
At 12/31 2009 Formula Stocks bought Apple Inc., a company we had owned on several previous occasions. Why?
It was a wonderful business at a very fair price. Joe calculated at the time that Apple could provide up to a 51.2% yearly return idealized. Joe also assigned Apple an AI-Score of +20.
What happened in the years after Joe made that call? A +111% investment return in the following 13 months, after which Joe decided to sell, to redeploy capital elsewhere.
Date: 2009
AI Score above average
Date: 2011
Total return+111.00%
Again in 2013 Joe turns to Apple, eyeing a 51.1% potential return. This time Joe goes on to make a +39.05% return before turning his attention elsewhere. Joe assigned Apple an AI-Score of +30.
Date: 2013
AI Score good
Date: 2014
Total return+39.05%
Again in 2016 Joe turns to Apple. This time Joe makes a +56.97% return before turning his attention elsewhere. Joe assigned Apple an AI-Score of +20.
Date: 2016