Our research products

Eriswell research concentrates on identifying European stocks and sectors where new information is emerging but where the significance of the information has not yet been fully dimensioned by mainstream research.

Like most market participants, we believe that sound investments are based on a thorough and detailed analysis of a security. Focusing on relevant but uncertain information, our research is complementary to mainstream fundamental analysis and provides an additional tool for optimising portfolio returns.

We have two separate research products:

StrategyWatch seeks to identify at an early stage new information with the potential to materially affect sector and sub-sector valuation.

StockWatch aims to detect companies whose stock price shows signs of being influenced by unidentified factors that could affect its future path.

Our goal is to get an early handle on how sector valuations are likely to respond to material changes in their business environment. StrategyWatch considers sector and sub-sector valuations in the light of significant new information that remains too uncertain to be fully incorporated into mainstream research.

In combination with an unconstrained and open-minded approach, our analysis applies proven analytical techniques that have been developed and successfully applied over the past fifteen years.

Central to StrategyWatch is the belief that significant new information, with the potential to affect large groups of stocks, often emerges in the market with a high degree of uncertainty attached to it. A scientifically based approach to stock analysis cannot factor in this uncertain information until it can be clearly identified and quantified. As a result, new information relevant to stock prices remains behind a kind of information barrier until it reaches the required degree of certainty (Fig1).

Stock prices, however, often react quickly to uncertain information as it emerges, causing a rapid divergence between the target prices of analysts and the level at which a company’s stock is trading in the market. Once out of sync with the market in this way, analysts can end up adjusting their predictions to keep pace with rapidly moving share prices, and in such circumstances their research can become to some extent degraded.

But it is precisely at these times that a large proportion of an investment portfolio’s performance can be determined!

StockWatch is radically different from mainstream research. Whereas conventional research is driven by information that can be clearly identified and quantified, StockWatch is designed to detect the existence of new information that has begun to affect a company’s stock price but has not yet been fully understood by the market (Fig2).

The cornerstone of our approach is the assignment of a “normal” pattern of behaviour to each stock. This gives a picture of how a stock typically behaves in relation to its comparators and to incremental information flows concerning such elements as earnings announcements, the emergence of new risks, management changes, analyst up/down grades, news stories, changes in market sentiment, etc.

Our analysis involves a combination of quantitative and qualitative techniques.

Quantitative techniques are utilised to bring data series into focus, not to form the basis of stand-alone trading strategies. Uses include the measurement of a stock’s relative performance and volatility against its market sector and its direct comparators and to test for mean reversion, which we believe to exist for short periods of time.

Qualitative techniques are subsequently employed to consider a company’s stock-price movements against its incremental information flow.

When atypical behaviour is identified, the stock in question is highlighted in regular StockWatch updates and in the Focus List. This provides a trigger for us and for our clients to consider possible explanations.

Currently we cover 450 stocks within the Dow Jones Stoxx 600 index. Upon request we are also happy to analyse other European stocks.