Author Archives: Cameron Hight

About Cameron Hight

Cameron Hight, CFA, is an investment industry veteran with experience from both buy and sell-side firms, including CIBC, DLJ, Lehman Brothers and Afton Capital. He is currently the Founder and President of Alpha Theory™, a Portfolio Management Platform designed to give fundamental money managers the ability to create their own repeatable discipline to organize the complex process of portfolio management.

Why do you buy an asset?

“We construct portfolios the way theory says one should, which is different from the way many, if not most, construct their portfolios.  We do it on a risk-adjusted rate of return.” – Bill Miller, legendary investor Why do you buy an asset? Because you believe that it is worth more than what you are paying for it. Assume you can […]

Good Sight, Good Insight: Risk Management by Ed Seykota

I was discussing portfolio management strategy with a client who runs a long/short equity hedge fund. In his former life, he worked for a large Fund of Funds where he evaluated long/short equity mangers. In that role, he frequently referenced an article on Risk Management by Ed Seykota. He had increasingly become frustrated with traditional manager measurement techniques like VaR, […]

True Transparency: More than Just Information

“The main reason investors struggle with how to react to bad news is that they really haven’t figured out why they own the stocks they own.” – Bill Nygren, Oakmark Fund     I have read several articles, like this one from Securities Industry News, over the past month discussing the coming trends of transparency. The article explains, “Several hedge […]

You Should Know about “More than You Know”

One of the best investing books I’ve ever read is “More than You Know” by Michael Mauboussin.  The great thing about Mauboussin is his focus on what he calls Consilient Investing.  He takes the best concepts from varying fields and applies them to investing, like what baseball managers can teach investors about improving our odds of winning or how biological […]

Is Market Movement Important to Portfolio Returns?

The short answer is yes, but I think it is a misguided question. I whole-heartedly agree that short-term stock movement and market direction have a large impact in portfolio performance.  The problem is that I do not believe that I have a proclivity to predict either.  So I am faced with a decision to either not invest or invest for […]

Managing Portfolio Liquidity: Position Level Calculation

Liquidity is a critical, yet often overlooked, risk constraint.  The reason it is frequently ignored is because position size is throttled by heuristics and mental calculation instead of having a repeatable method to factor liquidity into how the fund sizes positions.  Alpha Theory has developed a simple calculation to help determine portfolio liquidity constraints. Start by determining the minimum and […]

Building a Better Beta: Not all Beta is created equal

Most investors understand the concept of Beta, but do not appreciate that all Betas are not created equal.  We’ll start with a little Beta primer.  Let’s say you have two stocks, Huntington Banc (HBAN) and Invesco (IVZ), which both have a Beta of approximately 2. If the market moves 1% you would expect HBAN and IVZ to move 2%.  Investors […]

Grantham’s Great Investor Attributes

After reading Jeremy Grantham of GMO’s most recent letters, I see that there are several attribute of Mr. Grantham that I admire and think are common amongst other great investors: 1.     Willingness to say “I don’t know.”  Jeremy Grantham has great insight on a vast amount of financial market topics, but he is quick to say, “I don’t know”, when […]

Michael Lewis: Moneyball – Basketball Style (Why investors should heed the lessons of probability)

As a North Carolina Tarheels basketball fan, it pains me to say, “I like Shane Battier.”  After reading another great article by Michael Lewis in the New York Times titled “The No Stats All-Star” I recognize his skills of making his team better and it helps explains some of the losses he handed my beloved Heels during his reign at […]

Traditional Risk Management – Where does it fit in the future of Portfolio Management?

The chorus of pundits critical of VaR, traditional risk models, and Modern Portfolio Theory has grown louder over the years with a crescendo in the past few months with the public defeats of these theories in failing to defend firms against over-exposure in RMBS, CMBS, CDS and numerous other shaky acronyms.  Although I agree that stat-based risk management has its […]