Our ASM indicator is a proprietary measure of relative earnings estimate revisions at the sector/sub-industry levels and is the most important input for the majority of our investment recommendations. It is both a momentum and contrarian tool depending on its level relative to the previous two decades. We will typically conclude that the investment trend for a recommendation is consistent with the slope of this historical time series, and that the maximum risk/reward opportunity occurs near the inflection point of an extreme reading.

Our analysis has found that the critical strategic factor to determine the dominant relative performance trend for most S&P GICS groupings is the aggregation of analyst behavior at the company level regarding their forward profit expectations. When the ASM is combined with extreme readings of several other 8-panel inputs, our research shows that the ASM has been a powerful leading relative performance indicator (“clustering” – see pages 8 and 9 for example).

We view valuation as a measure of potential risk, and its importance comes from its current reading compared with levels at major historical relative performance inflections

Our proprietary 8-panel analysis is a key piece of information for new idea generation in our investment recommendation process. It provides a subjective, but disciplined, assessment of reward and risk by examining earnings estimate revisions, valuation, and price reversion for sectors (GICS L-1), industries (GICS L-3), and sub-industries (GICS L-4) versus the market or its peers‡ to predict 9-18 month relative performance.