Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. – Calvin Coolidge

Of all the managers with access to million-dollar data streams, teams of quants, and whose only job is to outperform the market, only 1 in 16 were able to do so consistently. It becomes ludicrous when you break down the S&P 500 strategy – “buy big stocks”! That’s it. Simply put, the S&P 500 index just tracks the top 500 profitable companies in the U.S. stock market.

If you look at it closely, the S&P 500 is a momentum strategy. They eventually cut companies that don’t grow at the rate of the market (companies that fall out of the list) and add companies that are growing above market rates which become big enough to be included in the top 500 list. The very nature of a market-cap weighted index means that the best companies eventually rise to the top and get added to the index and the losers fall out. The cherry on top is that they let the winners ride as long as they are present in the top 500 list and are profitable!

The strategy works because they have remained consistent with it over the past 5 decades. The index committee does not change strategy based on what’s happening in the market. They don’t wake up one day and say “you know what, tech stocks are booming and we should pivot to tech” or “the Fed is planning to increase interest rates – we should cash out and wait for the dip.” They have consistently stuck with the strategy of just buying the 500 biggest profitable stocks in the market!

How to beat the market?

If the market benchmark is based on “buy the biggest companies that are profitable”, shouldn’t we be able to do better by going just one or two steps deeper?

That’s precisely what we are doing at Market Sentiment. We use stock market and alternative data for backtesting strategies that reliably beat the market benchmarks. If you’re the kind of investor who doesn’t take stories at face value, wants the data to back the story, and learn more about investing – Market Sentiment is for you.

Over the past 2 years, we have analyzed over 100 strategies and quickly grown to become one of the most widely read finance newsletters on Substack with over 35,000 subscribers. Finding the ever-elusive edge is our passion and the content is borne out of our team's deep experience in equity analysis, quantitative finance & statistical analysis.

If you want to try out our content before subscribing, we have 2 years’ worth of free deep-dives in our archives. Here are some that we think you’ll like

  1. Why index investing works and how to beat it.

  2. Minimizing the downside using The Permanent Portfolio

  3. Why you should always buy the dip - Based on 30+ years of data

  4. DCA Strategy for the Crypto Market

  5. How you can beat the market by investing in the most reputable brands, customer loyalty leaders, and monopolies

  6. Holding on to high-quality companies with the Coffee can portfolio

  7. How to hedge for outlier events using tail hedging

  8. Identifying long-term trends using Warren Buffett’s favorite technique

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Also, there will be no spam from our side about offers/discounts to get you to go premium. Our readers are a remarkably insightful bunch who can easily see the value we provide and also see through gimmicky marketing. If the articles we have created over the past two years cannot convince you, no amount of marketing e-mail ever will! You will receive great content or nothing.

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At the same time, it’s important to highlight what we are not:

  • We are not a stock-picking newsletter - There are hundreds of them out there and it’s not a game we want to play. If you are expecting “Top 10 tech stocks to buy now” or “Secret stock picks of billionaires”, we discourage you from subscribing to our work. Our sole objective is understanding, analyzing, and writing about market strategies without speculation.

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Tired to hear people's opinions about the financial markets? Then go read some analysis that's backed by actual data. Market Sentiment is one of the best at this, go check it out. – Ecoinometrics

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This publication’s authors are not licensed investment professionals. Nothing produced under the Market Sentiment brand should be construed as investment advice. Do your own research before investing.


Market Sentiment
Investment strategies backed by data. New post every weekend.