Fundamental Investment Revolution
Re-Engineering the DNA of Value Investing
In the modern investment landscape, a "cold war" has long existed between two distinct camps: the fundamentalists, who rely on a deep qualitative understanding of company history and philosophy, and the quants, who trust only in mathematical rigor with limited attention on macro economy research on company/industry insights. At OrionAlpha, we believe that adhering strictly to either side leaves an investor partially blind. We are launching a new era of "Quantamental" investing, a strategy that acknowledges the limitations of human judgment and repairs them with the precision of data science. We do not just buy stocks; we engineer probabilities to revolutionize the classic value investment approach.
The first step in this revolution is admitting the inherent loopholes in traditional fundamental investing. While the "old way" of analyzing a company’s moat, culture, and management history is noble, it is often plagued by subjectivity. Analysts can easily fall victim to confirmation bias, becoming overly invested in a thesis and overlooking contradictory evidence, or relying on quarterly financial reports that serve as lagging indicators. We respect the depth of understanding that comes from studying a company’s industry position, but we refuse to rely on "gut feeling" alone. Instead, we use fundamental analysis to form a hypothesis and demand that quantitative methods provide the proof. By utilizing alternative data—such as satellite imagery, credit card transaction flows, and web traffic—we can validate our fundamental views in real-time, effectively separating objective reality from subjective optimism.
This objective rigor is crucial because the market itself is not a linear machine, but a stochastic, chaotic system of probabilities, making market timing notoriously difficult. To navigate this uncertainty, we reject the notion that anyone can predict the future with absolute certainty and instead adopt a Bayesian framework. This mathematical engine drives our decision-making process. We start with a "Prior"—our fundamental view derived from deep industry accumulation and experience. We then constantly update this view with the "Likelihood," which is derived from observing new, real-time data flows. This combination allows us to calculate a "Posterior" probability, a constantly evolving percentage of confidence. We do not try to be right once; we constantly update our probability of being right as new information hits, allowing us to adapt to a stochastic market dynamically.
However, having the right view is only half the battle; expressing that view correctly is equally important. Most funds express a bullish view by simply buying stock, a "delta one" approach that is often a blunt instrument, implying 100% certainty. We believe in using option structures to capture the nuance of our philosophy. If our Bayesian analysis suggests a high probability of a moderate rise but a small risk of a crash, simply buying the stock exposes us to unnecessary downside. Instead, we utilize options to create asymmetric risk profiles, constructing trades where the potential upside convexity far outweighs the cost. This allows us to trade the specific distribution of outcomes we foresee, rather than making a binary bet on direction.
Finally, our approach is fortified by deep research into cognitive debiasing and signal decay. We understand that even the best fundamental insights rot over time, and human managers often cling to these expiring signals out of nostalgia. Our algorithms strip out this emotion, measuring exactly how fast a value signal loses its predictive power and forcing us to exit trades when the logic no longer holds. By fusing the intuitive depth of the fundamentalist with the cold, hard probability of the Bayesian quant, we are not abandoning value investing; we are upgrading it. This is the future of our fund: a disciplined, data-verified pursuit of value that others simply cannot see.
