Below is a chart and brief excerpt from today's Early Look written by Health Care analyst Tom Tobin.
MicroQuads were born out of frustration. We've all had the experience being 100% confident on a name, being right, and still being wrong on the stock. Near perfect fundamental research, whether it is the outcome of a quarter, anticipated changes in guidance, the complete understanding of how the company narrative would play out, is no guarantee of success.
After mopping up the mess, we can look for explanations and narratives to explain away the mistake, like "the market," dumb money, shady management teams, and the like, but that doesn't get you very far. It’s certainly not a repeatable process.
Instead of narratives, MicroQuads provide a lens for data. If you follow Hedgeye, you know we look at data in terms rate of change, slope, and acceleration. A forward estimate trend is a line that frequently correlates with a stock price. If we know where estimates are going we generally have an good chance of getting the stock right.