The Research Tools and Services used by Fraser & Partners Investment Services
To assist us with portfolio construction and risk management, we use numerous tools and research services, some of which provide a fundamental analysis of the financial markets, others focus on the technical trading indicators, and others provide insight into macro themes and geopolitical risk.
The following describes one of the services we use – SIA Charts, a Canadian investment decision-making platform, and portfolio management application.
SIA Charts uses AI-powered technology to analyze tens of thousands of investments to rank them based on relative strength.
- Relative Strength of Equities
The first level of analysis that we explore using SIA Charts is the strength of equities compared to other asset classes. This is the broadest asset class decision – the percentage of your portfolio that should be allocated to equities. The SIA Equity Action Call helps us navigate risk by ranking the relative strength of thousands of stocks, ETFs, and mutual funds. The program runs over 10 billion calculations every night to identify whether equity purchases are favoured (green), neutral (yellow), or unfavoured (red). Right now, equity purchases are yellow or neutral. The chart below shows how trends have changed from favoured (green) at the beginning of January 2022 to neutral (yellow) on August 10, 2022
- Relative Strength of Asset Classes
The second level of analysis for asset class decisions is the ranking of 7 different asset classes: Canadian Equity, US Equity, International Equity, Bonds, Cash, Currency, and Commodities. These are ranked daily by analyzing global money flows to identify where the best risk-adjusted opportunities are over the next 6 to 18 months.It has been an extraordinary year so far with frequent changes in the relative strength of the different asset classes. At the beginning of the year, the asset class demonstrating the greatest relative strength was US Equity. By mid-February the equity action call had changed from green (favoured) to yellow (neutral), and Commodities had taken the lead as the strongest asset class relative to the others. Bonds were ranked as the weakest. In June the equity action call was red (unfavoured), and Commodities were trending lower relative to Cash. In periods of extreme uncertainty and high short-term risk, Cash may be the asset class with the most probability of outperforming the others (by preserving capital). This was the case from June 28 to August 10, 2022.
- Relative Strength of Sectors
When determining how specifically to invest within an asset class, we look more closely at the relative strength of the 11 different sectors. This is the sector and industry breakdown used by SIA in their analyses.
- Relative Strength of Stocks, Bonds, ETFs, Mutual Funds
Within each sector, there is one final level of analysis – the relative strength of individual securities. Suppose you have a diversified portfolio but want to target a small overweight in Canadian equities, and you’re interested in one of the Canadian railway stocks. Within SIA Charts we would identify the strongest companies and select from those potential investments.
In this case, the relative strength of CP.TO was in the green zone (favoured) compared to CNR.TO in the yellow zone (neutral). You may also have considered investing in an ETF focused on Canadian equities which held both CP.TO and CNR.TO. This is where your investment objectives come into play, including risk profile and time horizon. Combined with fundamental analysis, SIA gives us a framework for assessing potential investments based on relative strength.
The information in this commentary is for informational purposes only and is not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.