Our committment at Incline Capital is to build wealth for shareholders regardless of the political and economic environment. We do this by building models which are designed to profit in both rising and falling markets, or by following an investment process called trend following.

While the vast majority of funds focus on fundamental data such as corporate earnings or economic data in an attempt to predict where the stock market will go, we focus on following the trends which are actually occurring in the market. Put simply, our goal is to invest in assets when they are going up – because they are going up – and to avoid or sell short markets when they are going down – because they are going down.

This approach has several advantages. First, given that the vast majority of stocks follow the market, it makes sense to focus on the ‘big picture’ of whether we should own FDX or UPS at all, vice the less significant differences between the two.

Second, since trend following focuses on the price of the asset you are actually buying or selling, it leads to better risk management. Specifically, exit points and potential losses can often be defined in advance, and tightly controlled.

Naturally trend following works extremely well when markets are trending. The strategy can also help investors during more difficult, choppy, markets as well. Take for example the US Stock market from 1965 to 1980.

While stocks largely went sideways, there were significant bull & bear cycles throughout the 15-yr period. Being human, it would have been very difficult not to have made decisions emotionally, and bought near highs and sold near lows.

One of the oldest and simplest trend following tools is the moving average. Having simply bought stocks after they crossed above their 20-month moving average and sold them when they moved below it would have led to a 53% return over the period, or nearly double that of “Buy & Hold’s” 27% return. Having invested in 3-month US Government Treasury Bills when not in stocks would have pushed returns over 121% - with far less volatility as well!