(Editors' note: This article is meant as an introduction for Fundamental Momentum, a new Research Marketplace service by J. Stephen Castellano of Ascendere Associates LLC.)
J. Stephen Castellano - Equity Research Professional with 20 Years Experience
I founded Ascendere Associates LLC in 2009 to provide innovative equity research and financial modeling services that blends fundamental and quantitative approaches.
I have more than 20 years of experience in equity research and related consulting roles. Prior to starting my consulting company, I covered the steel industry and telecom services industries at global investment banks that are now part of UBS AG. I also spent several years as an equity research analyst with generalist coverage at a long-only manager with more than $900m in assets under management.
Since founding Ascendere Associates, I have developed equity research for family offices, consulted for e-commerce and financial technology startups, and have consulted for more established firms such as BCG Platinion, the risk management division of Boston Consulting Group. I have an MBA from the F. W. Olin School of Business at Babson College and a BA from Oberlin College.
All of these experiences have led me to create a successful strategy that is slightly aggressive, dynamic, and a bit more quantitatively oriented than what a typical sell-side analyst might produce.
In my formative years, I was always interested in strategy games reliant on optimizing outcomes from chance - Risk, Axis and Allies, Dungeons & Dragons, and the all-time great Apple II computer game Lemonade Stand. I also enjoyed learning about how things worked and how to write a good story. I played multiple team sports and was a captain of my college lacrosse team. I always enjoyed being part of a team and helping others. I bring the same intense interest to my equity research work that I did to strategy games as a kid.
The criteria for selecting stocks in my model portfolio strategies and associated equity research heavily weight proxies for cash flow growth and ROIC, and include the following:
- Relative Value
- Operating Momentum
- Consensus Estimate Revision Momentum
- Fundamental Quality
Fundamental Momentum is similar to Joel Greenblatt's "Magic Formula" or Goldman Sachs's "GS Sustain 25" in that it emphasizes the importance of ROIC. However, Fundamental Momentum is significantly improved compared to these two other strategies because it also utilizes consensus estimate revisions trends. The assumption here is that past operating trends may be confirmed by the degree of change in forward-looking consensus estimates.
Moreover, Fundamental Momentum strategies have the advantage of being relative in nature and focused more on trends, as opposed to selecting stocks that are measured above or below some absolute data point. As a result, tracking the output of these strategies can be useful in almost any type of market regime.
The long/short model portfolio strategies based on these strategies have a March 31, 2009, inception date, and theoretical returns have been tracked in real time since then. The theoretical data I have collected are unaudited and do not reflect any type of assumption for costs.
What is Offered in a Subscription
My service includes the following:
- Variations of a long/short model portfolio updated every 4-6 weeks.
- Highlights of the most interesting ideas from the model portfolio report.
- One in-depth equity research report each month of a promising long-term idea from the long/short model.
- The occasional review and analysis of ideas from other alternative sources.
- Daily updates on relevant news, returns, and price targets of stocks in the models.
- Two new long-only model portfolios of large-cap dividend yield stocks with fundamental momentum.
- Chat room access and feedback on almost any stock idea using my quantitative framework.
Seeking Alpha readers can still read my research for free, but it will be significantly delayed, and in many cases, it will be abbreviated. For example, the long/short model portfolio reports I have published freely in the past will be delayed by at least three months.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: There are limitations inherent in our theoretical model results, particularly with the fact that such results do not represent actual trading and they may not reflect the impact material economic and market factors might have had on our decision making if we were actually managing client money. Ascendere is in the business of providing equity research and related consulting services to investors and their advisors. The equity research it provides includes basic quantitative model portfolios and more detailed fundamental research with respect to individual stocks. Ascendere does not rate stocks on any scale, but does offer individual stock commentary and valuation opinions. With regard to Ascendere's portfolio strategies, "long" or "high-quality" baskets should generally be considered buys, unless otherwise noted. Stocks in our "short" or "low-quality" baskets should generally be considered sells, unless otherwise noted. While exceptions may occur, typically stocks on average in the high-quality basket are expected to outperform the S&P 500 over a month's time and stocks on average in the low-quality basket are expected to underperform. A more relevant benchmark than the S&P 500 would be comprised of all stocks and ADRs that trade on major U.S. stock exchanges with a market cap above $2 billion. Ascendere adheres to professional standards and abides by codes of ethics that put the interests of clients ahead of its own. The following are specific disclosures made by Ascendere: 1) Ascendere may have a financial interest in the companies referred to in this report ("the Companies"). The research analyst covering the Companies and members of the analyst's immediate family may have a financial interest in one or more of the Companies. 2) Ascendere generates revenue from research subscription revenue and consulting fees. At any given time it may be long or short any of the Companies. 3) Ascendere does not make a market in the securities of any of the Companies. 4) Ascendere has not received compensation from the Companies. 5) Ascendere has not managed or co-managed a public offering for any of the Companies. 6) Neither Ascendere nor any of its officers or any family member of the covering analyst serve as an officer, director or advisory board member of any of the Companies. 7) Neither Ascendere nor any of its officers or any family member of the covering analyst beneficially own 1% or more of any class of securities of any of the Companies. Disclaimers This report is intended for informational purposes only and does not constitute a recommendation, or an offer, to buy or sell any securities or related financial instruments. The report is not intended to be in furtherance of the specific investment objectives, financial situation, or particular needs of any individual recipient. Investment decisions should be based on an individual's own goals, time horizon and tolerance for risk. The information contained herein accurately reflects the opinion of Ascendere at the time the report was released. The opinions of Ascendere are subject to change at any time without notice and without obligation or notification. The officers, affiliates or family members of Ascendere Associates may hold positions in the securities of the Companies. No warranty is made as to the accuracy of the information contained herein. The views and opinions expressed in the market commentary reflect the opinions of the author and may be based upon information obtained from third-party sources believed to be reliable but not guaranteed. These opinions are subject to change at any time based upon market or other conditions. Ascendere disclaims any responsibility to update such views. This information is intended for the sole use of clients of Ascendere. Any other use, distribution or reproduction is strictly prohibited. Investing in stocks includes a high degree of risk, including the risk of total loss. This is for informational purposes only and is not intended to constitute a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. All information, opinions and estimates are current as of original distribution by author and are subject to change at any time without notice. Any companies, securities and/or markets referenced are solely for illustrative purposes. Past performance is not indicative of future performance, and no representation or warranty, express or implied, is made. This report is intended for informational purposes only and does not constitute a recommendation, or an offer, to buy or sell any securities or related financial instruments. The report is not intended to be in furtherance of the specific investment objectives, financial situation, or particular needs of any individual recipient. The information contained herein accurately reflects the opinion of Ascendere at the time the report was released. The opinions of Ascendere are subject to change at any time without notice and without obligation or notification. The officers, affiliates or family members of Ascendere Associates may hold positions in the securities of the Companies. No warranty is made as to the accuracy or relevance of the information contained herein. This information is intended for the sole use of clients of Ascendere. Any other use, distribution or reproduction is strictly prohibited. Investing in stocks or short selling stocks includes a high degree of risk, including the risk of total loss. Any dissemination or copying of this commentary is strictly prohibited.