Investing With The Top 10% Of Analysts on Covey
Generated 23% Returns Year To Date
At quick glance: Investing in the best analysts on Covey returned 23% this year. Here we share the data of what they are invested in now.
Not All Analysts Idea Data is Equal
Often we come across flow data, “Most Bought / Sold” or “Most Popular Stocks” in a community:
While interesting at first blush, we wonder “Can I make money off this data?” The quick answer is: if you could make money off it, the data would be behind a crazy expensive paywall.
Ultimately the community would need to be small enough to not be the same as the market and talented enough to beat the market, consistently. If this data were from a community of analysts at Citadel or Point 72, we could argue their “Popular Buys and Sells” are valuable, but investors pay millions in fees for access to that feed. Viewing the aggregate data of a community that is similar to the market is the same as looking at price swings and volume data for free on yahoo finance.
The Value of Ranking and Investing in the Best
Covey’s aggregate community data may not be worth much, but ranking our analysts using our community created Alpha Algorithm reveals the value of a transparent meritocracy.
Taking the top 10% of analysts from month n, then investing in them for month n+1 has returned 23% since Jan 1, 2022 (YTD). For comparison, the S&P has returned (18)% YTD.
The phenomena we are observing ☝️ is that great investors stay great. Much like Warren Buffet beats the market year in year out, the top 10% of investors in our community stay in the top 10%.
Performance Persistence on Covey
Said academically, this phenomena is called “Performance Persistence” and it has been observed in Retail Investors, Mutual Funds, and Private Equity. The general takeaway is that for 90% of the population track record does not predict future performance, but for an elite group in the top 10% they ignore efficient market theory and stay in the top 10% over longer periods of time.
We encourage you to check out the studies but jumping into the one about retail investors, “Can Individual Investors Beat the Market?”, PhDs at Harvard got hold of the trading accounts of a large brokerage and divided them up across different times. The study found that there was a positive correlation across time between the performance of different accounts, those in the top 10% outperformed the bottom 10% by 8% per year. If you want to learn more, there is a great book on this concept called Superforecasting and it has been observed by plenty of other academics(type in “Performance Persistence” into any research portal like SSRN and you can read the studies).
Analyst Data That is Valuable
Jumping into the juice, here is the position level detail on the top 10% of investors on Covey:
This data does not exist unless we have a transparent community that believes in a meritocracy.
Covey Has Big Plans For Our Community Data
For now, this data is available for anyone, soon we will restrict access to contributing Analysts on Covey. The community created the data and Covey will serve the best interest of the community by opening it up to contributors and potential buyers of the data.
For analysts: Start building your track record NOW! If this article shows anything, it is that performance over a period of time is highly valuable.
For investors who want this data: We are working hard on building an easy way for anyone to track these top portfolios with cash. More to come here…
