Algorithmic Equity Investing Portfolio Strategy Captures Upside Reversals: A Wall Street Transcript Interview with Ed Meihaus, Chief Investment Officer and Chairman of Hanseatic Management Services

Wall Street Transcript

67 WALL STREET, New York - November 1, 2013 - The Wall Street Transcript has just published its Investing Strategies Report. This special feature contains expert industry commentary through in-depth interviews with highly experienced Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Global Economy - Value Oriented Strategy - Value Investing - Exposure to Emerging Markets - Long-Term Investing - Investment Strategies - Large-Cap, Deep-Value - Large Cap Investing

Companies include: Best Buy Co. Inc. (BBY), Celgene Corporation (CELG), Micron Technology Inc. (MU) and many others.

In the following excerpt from the current Investing Strategies Report, an expert portfolio manager discusses his investing methodology and top picks:

TWST: Can you begin with an introduction to Hanseatic Management Services, including some highlights from the firm's history, a bit about your role there, the services you offer and your total assets under management?

Mr. Meihaus: The firm has quite a long history. It was started in Albuquerque, New Mexico, in the late 1970s by a businessman who grew up here, a Sandia Labs National Laboratory physicist who, based on his work at Bell Labs and other places, had devised a algorithm to presumably predict commodity markets and specifically interest rates and foreign currencies. They were a commodity-trading advisor for a number of years prior to my arrival in the mid 1980s.

I arrived in the mid 1980s after working several years in Los Angeles for three large S&P 500 firms as a financial analyst. My background was as a mechanical engineer as well as an MBA, and most of that work was analyzing large capital projects with the idea of knowing something about the engineering, but the work was primarily a financial analysis job. Through the course of that experience, I came to believe that fundamental analysis - I wouldn't necessarily say "flawed" is the right word, but is much more difficult in the sense that the variables that you analyze as a part of that process are much more difficult to forecast than is conventionally held. To forecast over a period of five years, or even 10 years, what the course of interest rates and inflation, cost of capital and then the macroeconomic variables that are associated with any particular investment is, whether it be IT spending or the price of energy, is very difficult. That's the case even for single variables much less the interaction of those variables. So then I sort of gravitated to studying technical analysis in all its different forms.

Over time I became skeptical of the usefulness of those tools as well, primarily because most are too subjective. So I began to devise my own model in the early 1980s using price as the only input to the model. That rudimentary beginning of the model is still in use today, although many new algorithms have been developed over the years. The products we currently have are all equity products...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.