23 Aug

Recommended Reading: Bernstein’s ‘Charts for the Beach’

WRITTEN BY David Ashworth

The annual chart edition

“A picture is worth a thousand words,” the adage goes. And Richard Bernstein Advisors seems to take this to heart, as the founder and chief investment officer, Richard Bernstein, who writes a monthly newsletter called Insights, dedicates one issue a year entirely to charts.

According to Bernstein, these charts are “five of our favorite charts that highlight what we think consensus is currently missing.” Richard Bernstein Advisors focuses on top-down research. The firm sticks to its top-down approach whether it’s style, size, or geography. Its focus is on corporate profits, whose trend can be seen from the graph below.

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Top-down research is one of two research approaches. The other one is bottom-up research. In top-down research, the focus is on macro factors like economic and geopolitical environment and their impact on financial markets. On the other hand, bottom-up research focuses on companies rather than the macro environment. The underlying belief in this approach is that even in bad times for their sector or industry, strong companies will continue to do well.

Actively managed mutual funds (ASMMX) (IGEAX) mostly employ bottom-up research to select stocks unlike passively managed ETFs (IWF) (IWB) whose composition changes only with a rebalancing or reconstitution of the underlying index.

In this series

The August edition of the monthly Insights newsletter is the annual “Charts for the Beach” edition. In this year’s publication, Richard Bernstein focuses on five things from fear about equities (SCHB) (RSP) (VUG) to the fallout of Brexit that markets are either not paying attention to or fearing unnecessarily.

The first chart compares the 1999–2000 market to the present market.

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