Since the beginning of the year asset allocators tell us they are overweight Europe versus the US and so this chart is for them, those that are thinking about investing in Europe and those that always have. It’s a chart that goes back to 2018 (a lot has happened in that period) which shows (the green dots) the Apollo Risk Adjusted Return signal – a proprietary signal.
The risk adjusted return (RaR) signal provides a monitor signal that allows any stock to be rated relative to its expected return forecast range, determined by the percentile score of the current share price with respect to a return probability range established between the 12m upside and downside forecast limits.
The RaR time series itself consists of a normalised score that dynamically ranks any stock based upon its relationship to this best-worst-case 12-month forecast expected return scenario, again, on a continuous time series basis.
Accepting the fact that we operate in uncertain times that could also be said of every other occasion when the signal appeared. Add into the mix that we are also seeing a low risk of loss (Margin of Safety) signal and it’s a powerful cocktail.
One other point to make; 9/18 sectors within the Stoxx600 (European index) are now screening with the same Risk Adjusted Return signal. The last time that occurred was March 2020.
Everything we do at Libra is from ‘the bottom up.’ The sector and market signals are an aggregation from the signal stock level. Investors can start at the market level and cascade from sectors to stocks to see the best opportunities.