Investment Strategy – Methodology
Follow the trend and do the opposite of what others do: A look behind the scenes of a successful long-term investment strategy.
Over many years DJE Group has been able to repeatedly attain results that clearly exceeded the relevant benchmarks of the underlying assets as well as beating the investment results of its competitors. Numerous industry awards and ratings support this. How do Dr. Ehrhardt and his team do it? With a wealth of experience, a systematic approach, and the FMM-Methodology.
The crucial preparatory work for the success of the group is done by the research department.
The bank-independent team of analysts profits from more than 35 years of experience and
applies a three dimensional analytical process, the FMM-Methodology. Now in use
for over 35 years, this methodology takes three views on the stock exchange and
financial markets: fundamental, monetary and market-technical.
Fundamental Factors: Fundamental research is decisive for our long-term asset allocation, which focuses on individual companies and their key figures. The analysts of DJE Group do not only look at earnings ratios, but also company value metrics and thus choose particularly solid companies with strong balance sheets. more
The quality of the company's management is also closely scrutinised: Do they have sufficient industry experience? Have they proven themselves in times of crisis? This critical assessment is no ivory tower exercise, but is carried out through on-site, face-to-face discussions with the company's management. Thus, the analysts develop a good feel for the prospects of individual companies. Taking industry sector comparisons and historical context into account, our experience allows us to draw good conclusions on the fair value of a company. We then take a broad economic view of the markets. For a given country, we look at areas such as economic growth, infrastructure and balance of payments. Is the social, political and legal environment reliable? Only if the analysts get positive answers to all these issues DJE Group will invest in the country's equities.
Monetary Factors: Our analysts use indicators such as bank lending, interest rates, money supply and surplus liquidity to predict future liquidity and hence establish, from a monetary standpoint, an overall picture of future stock market potential. more
That is to say, the analysts examine how much investable capital will be available for the market in the future. The delayed impact of such indicators can extend to many months. Our expertise on this topic extends all the way back to 1974 – to the dissertation of Dr. Jens Ehrhardt, the company's founder and Chairman. The insight gained over 35 years ago, that in developed economies, mostly characterised by high debt, the most important influence on economic activity and inflation comes from interest rates and liquidity of the banking system, is still valid. Monetary factors such as debt and lending, money supply growth, real interest rates, yield curve and currency reserves therefore deserve the highest attention.
Market-Technical Factors: “Homo oeconomicus” still exists in theory, but on the stock exchange, real investors – including the professionals – are also driven by emotional factors. Against this background, the analysts at DJE Group measure market sentiment using selected indicators and can often know in advance in which direction the trends are going and therefore react appropriately in a timely fashion. more
Financial indicators for the investment intentions and the positioning of market participants, such as puts and calls, cash positions of equity funds and directors dealings are meticulously analysed. Numerous polls in both Germany and around the world provide additional indications to the sentiment of investors. All these indicators are systematically captured and evaluated in our proprietary database, which probably goes back further in time than nearly all of its type. We continuously implement new ideas and identify and utilise opportunities for broader data collection to further optimise the system. With this methodology it is possible to identify extreme market moods and assess them objectively, identifying the crucial moment when one should act contrary to the crowd. Until that point, the most important stock market rule applies: "Follow the trend, because the trend is your friend."
Our investment approach is implemented consistently across all our funds and investment mandates. Proven over the past 35 years, it provides the basis for our decision-making process, which is constantly being fine-tuned.