Pretium Capital Management, Inc. is a registered investment adviser.

 

Investment Styles:

• Long/short equity 

• Equity Options

• Fundamental and Technical Analysis

• Concentrated Positions

• Opportunistic Stock Trading

• Momentum investing

• Sector Rotation

The primary investment strategy is active stock trading based on fundamental analysis of companies and the market. The strategy involves long-short investments in the US and European equity markets. This strategy also embraces concentrated positions, investing 30-40% of the portfolio in half a dozen companies. Returns are enhanced by opportunistic trading of stocks, while employing traditional valuation measures that equate a stock's price to the company's intrinsic value. We also buy stocks with a strong record of earnings and dividends.

Stocks, sometime called equities, represent ownership rights in a corporation. When you invest in a publicly traded company, you buy that companies stock (equity), a piece of the company. We invest in the common stock of the publicly traded companies. This form of stock is the most prevalent, and provides stockholders, you, with the right to vote for the members of the Board of Directors, attend Annual Stockholder Meetings and receive dividends.

Fundamental analysis involves evaluating all the factors that affect an investment's performance. For a stock, it would mean looking at all of the company's financial information, and it may also entail meeting with company executives, employees, suppliers, customers and competitors. We analyze the management; really understand what's driving the company, where growth is coming from and its future earnings potential.

Numerous academic studies conclude that almost all of the benefits of diversification can be achieved with approximately 30 stocks in a portfolio and that the majority of the benefits of diversification occur within the first 20 stocks in a portfolio. In 1972, Nobel Prize winner William F. Sharpe published an article on the effect of diversification on non-market risk1, which showed that increasing the number of stocks in a portfolio does reduce risk but once the portfolio reaches 25-30 stocks, the risk reduction is almost negligible. (Risk, Market Sensitivity and Diversification,“Financial Analysts Journal, January/February 1972, pp. 74-79).  Similarly, in the book “Investment Analysis and Portfolio Management,” Frank Reilly and Keith Brown reported, “about 90% of the maximum benefit of diversification was derived from portfolios of 12 to 18 stocks.” In “Modern Portfolio Theory and Investment Analysis,” authors Edwin J. Elton and Martin J. Gruber conclude that the average standard deviation (risk) of a portfolio with only one stock is 49.2%, while increasing the number of stocks in an average well-balanced portfolio of 1,000 stocks could reduce the portfolio’s standard deviation to a maximum of 19.2% (representing market risk). Interestingly, the authors found that with a portfolio of 20 stocks, the risk was reduced to approximately 20%. In other words, adding 980 more stocks to the concentrated portfolio in their study only reduced the portfolio’s risk by 0.8%.