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by Nicholas Mitsakos | Jan 7, 2021 | Book Chapter, Investment Principles, Writing
“Markets will stay in irrational longer than you can stay liquid” (John Maynard Keynes) As Benjamin Graham in “The Intelligent Investor” said, “Mr. Market is an irrational unpredictable schizophrenic”. Opportunities arise, but unevenly and unpredictably....We now live in a complex world where a range of tools is required for success. Anika’s investment strategy incorporates that range of tools. Anika’s investment approach is:
1. Proprietary
2. Multidimensional
3. Algorithmic
4. Disciplined
Defining investments into separate categories, such as “value” or “growth” is a mistake because it implies you have the equivalent of a single hammer looking only for nails. Anika uses an entire toolbox because successful investing demands understanding that the world has evolved, and the landscape of opportunities has changed significantly. Multiple tools and evolving strategies profits from this landscape of opportunities as businesses and markets evolve.
Anika’s investment strategy successfully exploits the pricing inefficiencies and emerging opportunities while minimizing risk to invested capital.
The investment world today is highly competitive with broadly available information. A unique investment strategy is essential for any firm to distinguish itself among competition. A more fundamental understanding is required because “bargains” are not easily understood. It is not simply a low price relative to current earnings. It is more complex and far-reaching because global disruptions to most fundamental industries – retailing, automotive, finance – are causing unprecedented long-term opportunities, as well as significantly increased volatility, and greater risk from bold strategic moves or creative destruction.
Global markets incorporating low-cost innovation (since the products are mostly software) and technical adoption at increasing rates create unusual profits on incremental sales in a “winner take all“ environment. The winners get stronger as they get bigger – the “closed loop” hypothesis – strong competitors gain more customers, those customers provide valuable data making the products and services better, and that attracts even more customers while expanding the existing customer base’s consumption. The winners continue to win in an upward spiral.
However, these businesses are also more vulnerable while simultaneously being dominant – regulatory risk, low barriers to entry, the next “guys in a garage,” etc. That is why markets will have extreme volatility and unpredictability making Anika’s investment model more effective. We generate superior risk-adjusted return because we incorporate these evolving factors into our strategy and take advantage of missed price assets to minimize risk.
Investment management requires new insights and a different mindset. Anika challenges assumptions, avoids herd mentality, and thinks independently. We believe our skepticism keeps investors safe and avoids things that are “too good to be true.” But, while we are skeptical, we understand the New World includes understanding superior technology, competitive advantage, earning power, the value of human capital, growth opportunities, and more extreme and compressed market volatility.
It is easy to say that price simply reflects a security’s intrinsic value, including its prospects. But Anika understands that the inputs to determine intrinsic value and prospects are fundamentally changing and difficult to predict. This understanding is the foundation on which we have developed our investment strategy.
Anika tries to create a compounding machine – we look for situations that create high rates of compounding return and do not interfere unnecessarily. That requires strict discipline on when to buy and sell. Combining probabilities of succeeding at challenging tasks can make the combined probability of success low. Insight gained through many years of diverse experience combined with proprietary algorithms focusing on these unique opportunities tilts the probabilities to Anika’s favor.
As Albert Einstein said, “not everything that counts can be counted, and not everything that can be counted counts.” Anika’s experience and proprietary tools identify the important factors that should be counted. We recognize they can’t always be predicted with precision, but that doesn’t mean they are not impactful. Absolute precision is not our goal, understanding trends, volatility, and risk enable Anika’s portfolio to deliver above-market returns with below-market risk.
U.S. Government Required Disclaimer (Required by the Commodity Futures Trading Commission). Futures and options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. Our website and the products, services and other information contained herein is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our website. The past performance of any trading system or methodology is not necessarily indicative of future results. The Anika Group Inc., Anika FX Inc., and Anika Capital Ltd., respectively, are software companies and do not offer financial advice of any type. Trading Involves Risk. Use of any of this information is entirely at your own risk, for which the Anika Group Inc., Anika FX Inc., or Anika Capital Ltd. will not be liable. Neither we nor any third parties provide any warranty or guarantee as to the accuracy, timeliness, performance, completeness or suitability of the information and content found or offered in the material for any particular purpose. You acknowledge that such information and materials may contain inaccuracies or errors and we expressly exclude liability for any such in accuracies or errors to the fullest extent permitted by law. Unlike an actual performance record, simulated results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.
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