Is Altimetry’s Hidden Alpha Really Good? [2024]

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Is Altimetry’s Hidden Alpha really good?

Does Altimetry’s Hidden Alpha investment strategy really work?

Can you actually achieve better investment results by following Altimetry’s Hidden Alpha stock recommendations?

Does Altimetry’s Hidden Alpha Investment Strategy Really Work?

So, what is Hidden Alpha’s investment strategy?

Hidden Alpha’s strategy is to find large-cap companies that are more profitable than what the reported financial statements make investors believe.

This strategy is developed by Joel Litman, a university professor in business strategy.

Joel Litman is also the CEO of Valens Research which essentially does the majority of the investment work for Hidden Alpha.

Later on, I will elaborate on this.

First, let’s go back to its investment strategy.

According to Hidden Alpha, the reported financial statements are not reliable.

The reason given is that the reporting rules can be applied differently and thus lead to inconsistency and make the comparison between similar companies more difficult.

Personally, I have studied a bit about accounting.

So, I know it’s possible for management to manipulate the financial statements to mislead investors.

For example, they can choose to use a certain accounting method to inflate their earnings.

On the other hand, there are reporting loopholes that could underestimate a company’s true earnings.

For example, if there are large non-operating expenses (e.g. write-downs, restructuring costs, costs related to divestitures, etc), this could reduce the true profitability of the company’s operating businesses.

On top of that, these inconsistencies in rules and the application of these rules by different companies make their financial statements incomparable.

So, what Hidden Alpha does is to have a group of analysts and accountants break down companies’ “As Reported” financial statements and rebuild them in a Uniform format.

By doing this, they try to uncover companies that have better true earnings than reported and also companies that have worse earnings than reported.

Here’s Hidden Alpha’s investment process.

First, they analyze all the US stocks using forensic accounting.

In other words, they change the as-reported financial statements to their Uniform Accounting-based financial statements.

Next, they upload all of this data into this software called “Altimeter”.

Then, they filter these stocks to find 200 companies with major discrepancies between what almost everyone thinks is true versus what is really true with a company’s earnings.

After that, they run an earnings call forensics.

According to their website, “earnings call forensics” means they listen to and analyze the earnings calls to identify any deception, evasion, or excitement generated by CFOs and CEOs.

Supposedly, these “earnings call forensics” would help them narrow down to a list of about 30 stocks that have massive upside potential.

This methodology sounds very fancy, but it does not have any scientific proof to support the method.

First of all, analysts and accountants are not professionally trained to spot and interpret verbal clues.

Even experts in this area cannot get it 100% right.

So, I don’t really think “earnings call forensics” is a reliable way to help you find stocks with upside potential.

Having said that, forensic accounting does make sense and is also used by a lot of institutional investors for their stock research.

Earlier on, I mentioned that Valen Research essentially does the majority of the investment work for Hidden Alpha.

Why?

Valens Research is a research firm that does forensic accounting.

It breaks down the financial statements of over 25,000+ companies globally to uncover GAAP and IFRS distortions (i.e. inconsistencies).

Then, it applies Uniform Accounting methods to reconstruct their financial statements.

“Altimeter” is an investment research product that is developed by tapping into Valens Research’s database and marketed specifically to retail investors.

Hidden Alpha is an investment newsletter that makes stock recommendations mostly based on “Altimeter” because I seriously doubt that they can find many “useful” deception markers during their earnings call forensics.

Altimetry’s Hidden Alpha Stock Recommendation & Performance

So far, how have Altimetry’s Hidden Alpha Stock Recommendations performed?

For the year 2022, most tock recommendations didn’t do well because of the market crash.

Below are two of the stock recommendations and their performance.

This is what Joel Litman said about one of his Hidden Alpha stock picks.

“Based on Altimetry’s Uniform Accounting analysis, Illumina should be worth roughly 20% more a year from now… 40% more in two years… and about 130% more in five years, compared to today’s price.”

Joel Litman recommends a buy price up to $510.

Here’s the stock price chart of Illumina.

It has dropped from its high of about $510 to $190 as of today.

If you had bought it at the high, you would be looking at a 63% drop in your investment.

Another one of Joel Litman’s Hidden Alpha stock recommendations is Ginkgo Bioworks.

Ginkgo Bioworks’s share price has been falling from its peak of about $15 to $2.8 as of today.

Altimetry’s Hidden Alpha Pricing

So, how much is Alimetry’s Hidden Alpha’s subscription?

And what do you actually get as a subscriber?

As a subscriber, you get the following:

• Each month, on the first Monday of the month, Joel Litman briefs you on his latest stock recommendation, predictions, warnings, and forensic analysis
• Receive updates on when to close positions
• Special Reports (i.e. Favorite SynBio Investment, Buy the Platforms, The Perfect Portfolio)

For the first year, there is a special discounted price of $49 per year.

Subsequently, your subscription is automatically renewed at $199 per year unless you call to cancel.

The low price of $49 is to get you in the door.

Later on, there are other products that will be marketed to you.

Here’s a list of investment products:

• Altimetry’s High Alpha:$5,000 per year
• Microcap Confidential: $5,000 per year
• Altimetry: $99 per month (or $1188 per year)

By the way, Altimetry is one of the many investment newsletters companies under “MarketWise”.

MarketWise made more than 500 million in revenue in 2021, largely by selling investment newsletters to retail investors.

So, it just makes me uncomfortable and skeptical.

Personally, I recommend that retail investors should ALWAYS educate themselves and learn about how to invest safely and rationally.

Trusting your money in the hands of stock pickers is not a smart decision because no one cares about your financial well-being more than yourself.

It’s okay to get investment ideas from trustworthy sources, but at the end of the day, you should make your own investment decisions based on your financial situation and investment objectives.

Alimetry’s Hidden Alpha Alternatives

Here are a few stock research platforms that I personally use to do my own research and analysis.

Seeking Alpha

Seeking Alpha Premium has all the financial information and data (i.e. US stocks as well as international stocks) to help you research and analyze stocks.

Also, its proprietary Author Rating and Quant Rating can help you filter through thousands of stocks easily and also help you identify the latest investment opportunity.

For each stock, you can find the latest Seeking Alpha Premium ratings on the stock:

1. SA Author Ratings ‒ ranging from Strong Buy to Strong Sell
2. Wall Street Ratings – consensus and price targets on the stock by Wall Street Analysts
3. Quant Ratings ‒ based on over 100 metrics, updated daily

The most interesting of all is its proprietary Quant rating.

It was developed by CressCap, quantitative analytics and data platform that was acquired by Seeking Alpha.

So, what exactly is Quant Rating, and also how does it really work?

Quant rating is derived by comparing over 100 metrics for the stock to the same metrics for the other stocks in its sector.

These metrics include the company’s financial data, stock price performance, and analysts’ estimates of future revenue and earnings.

There are five types of Quant ratings:

• Strong Sell (i.e. a score of 1)
• Sell  (i.e. a score of 2)
• Hold (i.e. a score of 3)
• Buy (i.e. a score of 4)
• Strong Buy (i.e. a score of 5)

The advantage of this method is that you can use Quant Rating to find the best performer of any particular industry or sector.

Here’s one of the best ways to make use of Seeking Alpha ratings.

Every day, Seeking Alpha publishes a list of stocks that earn top ratings from Seeking Alpha authors, Wall Street analysts, and its proprietary Quant System.

Personally, I think that just this list of Top-Rated Stocks is like a gold mine that could potentially help you increase your investment returns significantly. 

Below is the performance comparison between Seeking Alpha’s Strong Buy Recommendations vs S&P 500.

As you can see, it outperformed S&P 500 by a large margin.

Now, how much does Seeking Alpha Premium cost?

• Basic: Free
• Seeking Alpha Premium: $239/year $214/year
• Seeking Alpha Pro: $2,400 per year (mostly for hedge fund managers)

So, is it worth paying for Seeking Alpha Premium?

$189/year works out to be about $15.75/month (i.e. $0.53/day).

A cup of Starbucks coffee costs about $2.75.

Personally, I have been using Seeking Alpha Premium for my own stock research and analysis.

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Motley Fool Stock Advisor

I am a subscriber to Motley Fool Stock Advisor for many years.

Motley Fool Stock Advisor is focused on giving you stock recommendations that are high-quality companies with long-term growth potential.

The reason why I subscribe to Stock Advisor is to get stock ideas as the Motley Fool has a proven record of finding stocks with massive upside potential.

Personally, I don’t buy every single stock recommendation.

What I do is that if I find any interesting stock pick, I will do my own research again.

Below is the performance comparison between Motley Fool Stock Advisor and S&P 500 between 2002 and 26 June 2024.

As of 26 June 2024, average Motley Fool Stock Advisor recommendations have returned over 756% since inception while the S&P 500 has returned 161%.

In short, the Motley Fool Stock Advisor has outperformed the market 4 to 1.

But, what about its individual stock picks?

This metric is important because I might not be buying every single stock recommendation made by the Motley Fool Stock Advisor.

Below is a table that shows you the performance of individual stock picks over the years.

As of 6th September 2023, Motley Fool Stock Advisor has had 173 stock recommendations with 100%+ returns.

[Past performance is no guarantee of future results. Individual investment results may vary. All investing involves risk of loss.]

Will the Motley Fool Stock Advisor always be right about their stock recommendations?

No, because no one can be right about their stock picks 100% of the time.

Let me sidetrack a bit here.

If any stock picking service tells you that they have a close to 100% success rate on their stock picks and can guarantee you high investment returns, you should definitely stay away.

Even Warren Buffet has loss-making stocks in his portfolio, but he still achieves above-average returns because a few big gainers in the portfolio can make up for the under-performers.

What I like about the Motley Fool Stock Advisor is that they are very open and transparent about their bad investments.

As a member, I can see the performance of ALL its past and current stock recommendations (even for closed positions).

Some other stock-picking services that I’ve tried, don’t publish the performance of all their past and current stock recommendations, so it’s not easy for you to find out their true track record.

So, if you are thinking of getting into stock investing, I highly recommend the Motley Fool Stock Advisor because I think there are a lot of well-researched stock recommendations.

By the way, I don’t buy every single stock recommendation by Motley Fool Stock Advisor.

I mainly used Motley Fool Stock Advisor to get stock ideas because they have a track record of finding multi-baggers.

For example, it first recommended Nvidia back in 2005, then again in 2009, then again in 2017.

It first recommended The Trade Desk in 2017, and has recommended it multiple times over the years as shown below.

It first discovered Netflix back in 2003 and has recommended it multiple times over the years as shown below.

So, I like to use the Motley Fool Stock Advisor as an important source of investment ideas.

I will read their research team’s analysis and then also do my own independent research on platforms such as Stock Rover and Morningstar before I decide whether or not I want to invest in the stock.

In terms of pricing, Motley Fool Stock Advisor is also much more affordable.

Usually, its annual subscription is $199.

Right now, there’s a special limited-time 50% OFF offer* for new members for the first year when you click the link here to try it out for 30 days with a Membership-Fee-Back Guarantee. (*Billed annually. Introductory price for the first year for new members only. First-year bills at $99 and renews at $199)

So, for $99 a year- that’s just $1.80 a week – you can gain unlimited access to their library of expert stock recommendations which are carefully selected to help you grow your wealth.

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