Editor’s Note: Today I want to share an essay from my good friend, and fellow “quant,” Jason Bodner.
Jason has spent decades developing his own unique quantitative system for picking winning stocks. We share the same core beliefs about solid fundamentals and following the big money. Below, he shares how his system can give Main Street investors the kind of “edge” Wall Street has had for decades.
You probably don’t realize it, but you’ve been fighting against the great Data Divide your entire investing career.
This Data Divide has meant that everyday investors have missed the biggest trading profits for more than half a century.
Since Feb. 8, 1971, the wealthiest folks in America have accumulated more and more wealth … while the average investor hasn’t been able to keep up.
On that day, the first electronic trade was executed via the Nasdaq Data Center…
As someone who ran trading desks, I’m struck by the plainness of that picture – a single person sitting at a little computer monitor that was no doubt monochrome. Nowadays, one trader might have six monitors that are double or triple that size … each constantly showing up-to-the-second data.
This was the very first time technology made possible both unprecedented trade execution and the sharing of stock quote data.
Few people understood it at the time, but this completely changed the game. Since that day, those with the fastest access to the best data would ultimately win… again and again and again.
It was the end of relaying on old-fashioned ticker tape to make trading decisions. And it was the beginning of Wall Street’s access to real-time stock data directly from the exchange itself… while everyone else was stuck looking at data after the fact.
A little over a decade later, in the mid-1980s, the man known as the Quant King – Jim Simons – used high-powered computer algorithms to turn every $1 invested into $42,000.
Meanwhile, everyday folks turned $1 invested in the S&P 500 to $18.
And when High Frequency Trading debuted in the early 2000s, firms spent over $300 million installing fiber-optic cables directly from Wall Street to the Chicago Mercantile Exchange… so they could get data before Main Street investors saw it.
We’re talking about a mere five milliseconds earlier… less than half the time it takes to blink your eye. But those milliseconds created a powerful disparity between Wall Street and the Main Street investor.
Here’s what I mean: By being on the right side of this Data Divide, a firm like Virtu Financial made a profit 1,277 out of 1,278 days.
Be On the Right Side of This Divide
With artificial intelligence finally becoming a real and useful weapon in Wall Street’s arsenal – allowing faster and more data analysis than ever before – the wealthy elite’s existing advantage is only going to get more powerful.
In fact, one key executive at Softbank sat down with Institutional Investor magazine and pretty much told them they could now get ahead of company events like mergers and acquisitions, earnings shocks, and FDA drug approvals prior to that information hitting the mainstream news.
We need our own data edge to get us on the right side of the divide.
I realized this a long time ago, and I spent decades and hundreds of thousands of dollars developing it. This was Project Quantum, and it resulted in our Quantum Edge.
I started with hundreds of data points for each individual stock, and to this day my system looks at 1.3 million data points daily. Through my own research and picking the brains of some of the most successful investors, I narrowed everything down to 29 factors that best predict a stock’s future price movement.
I then tweaked the recipe – a pinch more of this, a dash less of that – until extensive back testing gave me the results I wanted. More than 30 years of results show that by accessing the right data and analyzing it the right way, the Quantum Edge system identifies moneymaking stocks roughly 70% of the time and beats the broader market by an outstanding 7-to-1.
There are multiple layers within those 29 factors, but I can summarize the conclusion for you pretty easily. The best indicators of a stock moving higher are exceptional business fundamentals, strong trading technicals, and Big Money flowing in.
Yes, the same Big Money that spent untold amounts of money to get data before everyone else.
When you make a trade, high-frequency platforms see your order information – the stock, number of shares, and price – before your order is actually placed. They use that info to make money on a trade. It’s mere pennies – or even less – per trade, but when they do it a bazillion times a day, it adds up.
My Quantum Edge system doesn’t do that. High-frequency trading is too crazy for me. But my system does sniff out where Big Money is going, its nose is to the ground tracking Big Money’s footprints like a hound dog hot on a scent.
Ever since all the big names like Goldman Sachs (GS), Morgan Stanley (MS), and BlackRock (BLK) – to name just a few – went all-in on AI’s ability to 10X their data edge, I’ve lost count on how many times my system has seen Wall Street get ahead of big news events that the little guy would stand no chance of ever even predicting… let alone profiting from.
Just the Facts
Sometimes those signals are not what you expect, like PBF Energy (PBF) at the beginning of 2022.
PBF was coming off an almost 30% drop as the company was caught in the middle of an oil-spill scandal. The Associated Press reported the company delayed repairs for a corroding pipeline for more than a year when 300,000 gallons of fuel spilled into the wetlands of the Mississippi River.
And things only got worse for the company when Russia invaded Ukraine. PBF warned investors that production would slow because of the war.
From that perspective, there’s no way you’d expect this stock to shoot up 100% or more in returns in the coming months. Not if you were on the outside looking in.
However, on January 7, our Quantum Edge system lit up green for the stock. Somebody was buying this stock. Somebody knew something. And that means a big move usually follows.
Sure enough, PBF soared a whopping 168% in the next six months.
But Project Quantum isn’t emotional. It isn’t swayed by scary headlines or what we think “should” happen.
It gives us that data edge that so many investors have been on the wrong side of for decades. It knows what data to retrieve and how it can reveal what is happening – and predict what will happen.
In other words, whether a stock is likely to make you money or not.
And that’s the only decision that matters.
The biggest divider between Wall Street pros who make millions and everyday investors is data.
With Project Quantum, you can now get on the right side of this Data Divide, say goodbye to the days of being a victim to Wall Street, and put their key advantage to work for YOU.
Editor, Jason Bodner’s Power Trends
P.S. Back when I was on Wall Street, I saw how easy it was for the rich to get richer… and how impossible it was for the little guy to keep up.
The average Main Street trader loses about 90% of the time.
With the new developments in AI, it’s clear to me anyone who doesn’t get on the right side of the Data Divide is going to get left behind.
I don’t want that to happen to you. Click here to learn more in a special video presentation.