A top-down approach to bottom-up stock picking: CFA conference

This week, senior editor Dean DiSpalatro is reporting live from CFA Institute’s 69th annual conference.

To round out yesterday’s sessions, Sebastien Page, co-head of the Asset Allocation Group at T. Rowe Price, discussed two ways to enhance portfolios.

Today, industry experts are discussing China in the world economy, as well as active management. Stay tuned for our coverage.

In the meantime, check out our collection of live tweets below. Also, keep following @advisorca for more from the conference.

Live Tweets from CFA Institute annual conference

Live tweeting resumes from @CFAinstitute Annual Conference: Top-down approach to bottom-up stock picking. The session features Peter Berezin, chief strategist from BCA Research. #CFAInvest

Fraction of active investors who are truly active has been shrinking. Berezin says about 20% are truly active.

Berezin: Interests not necessarily aligned between people investing money (managers), and the people actually investing. #CFAInvest

Characteristics associated with above-average returns: small caps and value stocks generally outperform large caps and growth stocks.

Why do small-cap and value outperform? Market is simply making mistakes, says Berezin. #CFAInvest

Berezin: Hard to predict earnings growth over long horizon. Stocks that most equity analysts like tend to do poorly. Do opposite. #CFAInvest

Berezin: Momentum is a decent signal, but needs to be medium-term momentum; then the “trend is your friend.” #CFAInvest

Berezin: People tend to be eager to realize gains, but reluctant to realize losses. Good earning reports generate selling, and that can prevent a company from realizing fair value.

Berezin: You want a system that aggregates the 30 or anomalies (e.g. fact people tend to “sell in May and go away”) in a systematic way.

Berezin: You also need to factor in macro environment into stock-selection process. #CFAInvest

Berezin: You want a system that aggregates the 30 or so anomalies (e.g. fact people tend to “sell in May and go away”) in a systematic way.

Berezin: You also need to factor in macro environment into stock-selection process. #CFAInvest

Use anomalies to pick individual stocks “and to time the overall market,” says Berezin. #CFAInvest

Anomalies persist even though people know about them. They may not be as potent as they once were, but still there, says Berezin. #CFAInvest

Anomalies not fully exploited due to behavioural biases that persist, says Berezin. #CFAInvest

Berezin says long term, stimulus efforts of China’s authorities “will end in tears — it always does.” #CFAInvest

Berezin: Trump and Sanders both want higher wages for American workers; good thing if you’re a worker, but if you’re the companies paying those wages, it would chip away at profitability and could depress equity prices.

Berezin says central banks are doing the right thing keeping rates low. In fact, they should do more — bring on the helicopter money.

Central banks “should be printing money and handing it out,” argues Berezin. #CFAInvest

Berezin: Bubbles, historically, aren’t atypical. What’s surprising is how unprepared people were for 2008-2009. #CFAInvest