‘A good decision is based on knowledge and not on numbers’ – Plato
A few days ago, a friend of mine making their way in the investment industry, asked for some advice about a job opportunity, where a company picking their investments via mathematical methods, was looking to hire someone more focused on more qualitative or interpretative insights. It sounded to me like a good opportunity – and I told my friend to go for the job interview.
The reality is that numbers can only tell you so much. Of course I use numbers for insights on revenue, profit and cash flow trends and to help generate some useful valuation ratios to compare and contrast different companies, sectors and markets. However for me, in today’s world, it is all those shades of grey between these numbers that matter more.
I read a few weeks back that President Trump wanted to cut down the formal quarterly reporting requirements for US companies, as part of his deregulation drive. Now this seems a sensible way to cut red tape and possibly even boost the capability of a company to think long-term. However the trade-offs are way too big.
UK corporates – especially if they do not have material business interests in the United States – have looser reporting requirements than the quarterly results cycle that exists in the US and wide swathes of Europe and Asia. It leads to two clear conclusions. The first is that it has not cut red tape or particularly liberated corporations to think long-term (compared to other corporations globally). The second is that the bigger gaps in formal corporate reporting…are often filled by less useful updates for investors. Knowledge is power and less knowledge for investors is not good for anyone. The smartest corporations know this already and go way beyond the regulatory minimum in providing information and insights for investors and analysts to think about. This is the basic fuel that fires qualitative analysis.
Ironically too as computing and mathematical power gets stronger, the value of doing something different and complementary grows and grows. This is why on the Dynamic Global Opportunities Fund we take the best and most useful elements of the quantitative side and combine them with the rich and deep landscape of qualitative insights…or at least we try to!