Two Rivers Analytics (TRA) is an institutional research firm serving hedge funds, mutual fund companies, family offices and RIA’s. We provide actionable, high quality investment ideas, with an emphasis on short recommendations to our clients. We also publish related portfolio strategy work on estimate revisions and factor behavior.
Since inception, through July 31, 2014, Two Rivers’ average short recommendation has underperformed the S&P by 6.9% over the subsequent 3 months and 12.5% over 6 months (not annualized). Fifty-four percent (54%) of short recommendations have underperformed the S&P500 over 3 months, and 69% over 6 months.
Last year, in a difficult year for short selling, TRA achieved an 8.7% short return relative to the S&P and 18.8% short alpha.
(S&P returns are matched with each short recommendation. Beta per FactSet. Stats for 2013 are for reports published in 2013 and measured from report date through year end 2013.)
Performance Updates are made periodically on our blog.
Some notable short recommendations include A123 Systems (AONE), Central European Distribution Co. (CEDC) and Overseas Shipholding (OSG), all of which went bankrupt after our short recommendations. We have also written short reports on Deckers Outdoor (DECK), US Steel (X), GrafTech Inc. (GTI), Quicksilver Resources (KWK), Clean Energy Fuels (CLNE) and Guidewire Software (GWRE) generating short profits for our clients.
Our process combines a ranking system designed specifically for short-selling and fundamental analysis. Our models call out companies for:
- Poor earnings quality
- Deteriorating business trends
- Dangerous Financial Condition
- Speculative or unjustified valuations
- And red flags extracted from the footnotes of SEC filings.
Our independence enables us to follow the data where it leads. We provide a perspective frequently at odds with standard sell-side research, in particular, from the larger investment firms. Two Rivers Analytics generates insights that help clients outperform their peers and save time.
- Provides a steady stream of short ideas to hedge funds
- Helps avoid companies with hidden risks on the long side: manipulated earnings, breaking businesses, ‘red flags’, cash flow issues or expensive companies
- Provides a rigorous sell discipline, for which an independent voice is critical
- Saves analysts’ and PMs’ time in getting to good ideas faster
- Deploys a suite of tools to support clients’ efforts