We should say right now that in Cestrian Fundamentals we run a very different kind of subscription service to that which you will find elsewhere. Your regular pay service runs thus: here’s what to buy and when and why. Here’s what to sell and when and why. Why? Usually the real answer to why is, because I said so. And I, the Great Provider Of Stocks Wisdom, have pronounced. And you, the Humble Subscriber, have used up your question quota for the week. Begone!
This lends itself to a model portfolio which ought to be followed beat for beat, note for note, trade for trade. If you can find a good service of this kind, and there are some, they can work. In our experience you have to make like a bot and follow slavishly to make them work. Apply any interpretation or creativity and you soon find your returns diverging from the model portfolio. When you’re beating the model that’s great - you feel like a genius! - but when you aren’t, feeling like the dolt your inner self has always suspected you to be, you can find yourself scrambling to get back to the Defined Path To Stock Success as laid out by whichever Great Leader is running the service. And that can be tough. You end up chasing your tail and it rarely ends well. A good model portfolio service is a great thing. If you find one and you can check their returns going back years, in good markets and bad, and you like the risk profile and number of trades per day, etc, great. Sign up and follow the model and hopefully the future will be like the past for that service.
The Unmodel Portfolio
In the Cestrian Fundamentals service, we don’t do this. We don’t run a model portfolio, don’t tell you what to buy or when, or what to sell and when. We don’t tell you what % of your account should be held in security X or Y. We don’t do any of that. But we do run one of the more expensive services on Seeking Alpha. So what’s up with that?
Here’s what’s up.
You don’t need someone to tell you what to do all the time. You are, or can be, a much better investor than you think you are. And you are, or can be, a much better trader than you think you are. The reasons you aren’t better already are not at all because you aren’t smart enough, are too smart, aren’t quick enough, are too quick, don’t have the right education, have too much education, don’t have enough time, or have too much time. The main reason you aren’t better already is because you have a huge industry dedicated to telling you that everyone else is better than you. And this kind of marketing works at some level. In the dark of night the primeval parts of your brain are busy telling the conscious parts to give all your money to an asset management firm and pay them a management fee from here to Eternity. That being how advertising works, by worming its way into your inner self and then having it deliver the message. On account of you trust your inner self more than you do a smooth talking actor on TV. And on account of all those geniuses on FinTwit, wow they knock the cover off the ball all the time, right? Well, don’t let us stand in your way. Want Fidelity or another money machine to manage your hard-earned? Have at it. Pick a good one, some of them are. Want to become a follower in the Cult Of FinTwit? Go for it. There are some very good money people on FinTwit.
But if you run money yourself, be it your own or other people’s, and if you’re a US investor wanting to invest in or trade US equities, then our service can help you sharpen your skills. Because we don’t tell you what to do and then patronize or ignore you if you ask why. We do the opposite. We tell you what we are doing with our own money in staff personal accounts, and why we’re doing it, before we do it. Blow by blow, turn by turn. If you want to follow these ideas, be our guest. If you want to take the ideas and improve on them, or come up with entirely new ideas that you can share with us and our community, wonderful. We have a superb group of subscribers who use the members-only chatroom to do just that.
We’ll tell you how this works and then we’ll give you some quotes from our subscribers where they explain how it works for them.
1. Stock Selection
Our firm has a great deal of expertise in technology and space stocks. Bunch of fancy degrees followed by decades of institutional investing and trading experience coupled with a little time spent at the International Space University (yes that is a thing!) gives us great confidence when it comes to understanding stocks in these sectors. We use our experience to identify and hone a coverage universe of names in each sector, meaning at any one time we typically provide deep-dive analysis of around 20-30 stocks in tech and around the same in space & defense. We like companies with high levels of revenue growth, long-range visibility on the continuation of that growth, high gross margins, and cashflow that is either positive, or negative but with a clear and obvious path to turning positive. We don’t care about any Wall Street stuff. You won’t see us talk about estimates, consensus, EPS numbers, p/e ratios, nothing like that. Doesn’t matter to us. We come at this a different way.
2. Analytical Method
We use fundamental analysis of revenue, profitability, cashflow, balance sheets and remaining performance obligation (in tech) or backlog (in space & defense) to understand the company (which is a different matter to the stock) and we use technical analysis to understand the stock. We do not at all adhere to the extremist notion that one needs to be either a fundamental or a technical analyst. Pure fundamentalists think that technical analysis is voodoo, and pure technicians think that fundamentalists are naiive. These positions are wrong - don’t let yourself become radicalized by them. Fundamentals and technicals are both useful tools if used correctly. Fundamentals tell you all about the underlying business, how it is performing and how it is likely to perform in the future. Fundamentals give you a clue as to what catalysts might impact the stock price in the future, and when. Technicals - stock charts - give you clues as to where the stock might move next, and why. There is no voodoo to this. Stock charts move according to how human emotions respond to internal and external catalysts. You just have to learn to spot recurring patterns and play them to your advantage. If you can spot a shape or count to five, you can use technical analysis tools. In our service, we use both. The core of the service is fundamental analysis. We want to understand our companies in the nth degree, so that we have some insight into their potential when things are going well, and when the market is tough, so that we have conviction on which stocks should be held through the storm and which tossed overboard. We use technical analysis to judge when might be best to open a new position in a stock we like, when to add to that position, when to lighten up on it a little in case there is trouble ahead. Fundamentals can’t help you do that, and technicals can’t help you choose a great company. You need both. We use both, and more importantly, we’ll help you to use both.
More than anything, in our service, we run cold. Ice cold. We never fall in love with a company or a stock. It would be foolish. Not only do stocks not love you back, they don’t even know you exist. And if they did know, they wouldn’t care. Stocks are there to serve your interests. You are not there for stocks to take advantage of. So we run cold and let others run hot.
3. Sharpening The Skillset
Anyone who can add up can understand fundamentals. Anyone who can spot a pattern can understand technicals. It really and truly is not more difficult than that. In our service we spend a lot of time walking you through why this or that matters in the earnings just published, why the CEO said that or did not say this on an earnings call (which we often analyze in real time - this is a popular part of our service) or why this or that pattern on the chart probably means that the stock is going to do this or that. One of our Three Rules Of Chat, is, 2. - There Are No Dumb Questions. Because anything you think is a dumb question? It’s not. It’s probably a great question and answering it will probably help everyone, not just you. In our long careers in investments, we have found that every great question has always been prefaced by a staring-at-the-shoes “this is probably a stupid question but ….”.
4. The Power Of The Network
Now, our subscribers bring many different skills to the table and you can expect to learn from the community all day long - certainly we ourselves do. Most every day we learn something in our chatroom from the investors, traders, industry people, professional money people and neurotypical money people that we count as members of our community. Want to understand the Fed’s latest moves? We have a couple of pros that chime in on this. Want to get to grips with which are the hot themes and companies in cybersecurity and why? We have IT pros to help you. Want to understand how hedge funds are thinking about the market right now? We have members who have that covered and will share their thoughts with you.
Best of all, this is one community that actually does work together. Nobody has sharp elbows - why would they? There isn’t a corner office or a promotion to joust over. Everyone is absolutely aligned in trying to improve their returns and their risk control.
4. What Our Subscribers Say
We have a set of great reviews on Seeking Alpha, which you can read anytime. But over and above that we wanted to share with you some recent comments posted in chat by our members about our service. If you’re even thinking of signing up with us, this is the best information we can give you. Because more than us believing our own blarney, here are some folks who part with their hard-earned every month or year to be part of the Cestrian Fundamentals community.
- “This is a great investment community led and guided by Cestrian Capital Research” - Annual member, joined 20 January 2021
- “Before 2019 I knew very little about investing. Our money was with a Private Bank (a well known one at that) and it grew very little each year, if at all. I decided it was time to take control of my finances and needed to learn how. I’ve subscribed to MANY services since and I not only rate their value by how much money I gain but by how much confidence I gain with my investment choices. (It’s hard to stay the course without the deepest conviction!) I want a service that shows me the deepest details behind their opinions. This is one of the two most valuable services for me on Seeking Alpha” - Annual member, joined 28 November 2020
- “An excellent service with a great community… I like it here. Not too busy, lots of great conversations and relevant macro and company specific stuff. When I lack the time to read a message board, ‘Fundamentals’ is the last one to be cut” - Annual member, joined 29 January 2020
- “Here’s why I think Cestrian is the best. Before leaving banking as a rates trader, I spent very little time developing a systematic way of thinking about stocks [since bonds were my area]. When I subscribed, I was drawn to how Cestrian had developed a method of systematically thinking about cloud stocks as a class. And that really opened my eyes. And it is the framework that I learnt and started using that helped me understand more about stock investing across board and develop real conviction about individual names. And in hindsight, the framework, plus in-depth discussions from our members here is more like an MBA class really. Teach a man how to fish and all that. I am now able to hold conversations with my friends in venture capital about company potentials etc and that all comes from the learnings here. The conversation here is also fun, thoughtful, in-depth, where everyone learns a ton. It is a community where the members really connect.” - Annual member, joined 10 August 2020.
- “For me the value comes down to technical analysis and ‘gut’/experience related commentary following earnings calls, especially the Excel revenue/FCF/Deferred revenue rolling spreadsheets, and exchange of views and ideas on specific stocks (with invaluable industry/product knowledge input from some of the members) and macro environment”. - Monthly member, joined 6 May 2020
- “I started out with a trial. I never even thought I would pay for any such service until I tried it out for myself and saw that it gave me so much, not only a big return on my investments, but also a lot of knowledge from reading the articles and all the content from the members of chat”. - Monthly member, joined 7 June 2020
Without further ado, we invite you to sign up for a free trial
. For two weeks you get access all areas and plenty of time to decide to stick around, or not.
Click that link to get started!
Cestrian Capital Research, Inc - 17 Jun 2021.