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Patton Wealth Management, Inc.

Form CRS
  Reports

Audacity Strategy

- the willingness to take bold risks

Is Audacity an investment for you?

Audacity could be for you

  • Are you seeking performance better than the S&P 500?
  • Do you want, or more likely need, an investment NOT dependent on the S&P 500 going higher to perform?
  • Would you like a strategy built on proven and verifiable success?
  • Do you want a strategy with a repeatable process?

Audacity is NOT for you

  • Are you looking for free and easy ride?

Turbocharging Success

The Audacity Strategy is a turbocharged version of Patton's existing hedging strategy designed to produce returns that are 2 - 4 times the S&P 500 with a risk profile, based on various metrics, similar to that of the S&P 500. The existing strategy has proven successful over the last 10 years making it one of the top performing long/short U.S. equity strategies in the world since its launch in February 2010. In addition to 10 years of proven success, the Strategy is supported by research spanning 5 decades of market data.

Goal

Be the best performing long/short U.S. equity strategy in the world over the next decade.

Exceptional Performance Expectations

Goal of 2 – 4 times the S&P 500

Average Growth of $1

Audacity has research extending back to 1963. Based upon this research, the following table shows the average growth of $1 invested over various periods of time. For example, over the average 5-Year period, $1 invested in Audacity grew to $6.30 as compared to the average $1 invested in the S&P 500 growing to just $1.61. The Worst and Best outcomes are provided below.

All performance numbers are shown net of all estimated fees and expenses. Audacity’s simulated net performance since July 1963 is +41.6% compounded annually.

Investment Strategy Overview

Investing in the Audacity Strategy requires taking a bold but very calculated risk. The Strategy is a repeatable, purely mathematical process designed to systematically take advantage of other investors' poor human behavior. It is supported by both proven success and extensive research and testing.

Here are some highlights:

  • 100% highly liquid U.S. stocks
  • Hedging strategy that profits from some positons when they go up in value and profits from other positions when they go down in value
  • Behavioral Finance investment principles
  • Rules-based model – the investment principles are implemented entirely by a set of static mathematical rules, with no human emotion on our part, to take advantage of the behavioral-based principles

Success NOT reliant on the S&P 500

Audacity is unlike nearly every other high performing strategy of the past decade in that it is NOT reliant on the S&P 500 going higher to produce a strong return. Mathematics, specifically the statistic R-Squared, illustrates this characteristic.

R-Squared Defined

R-Squared: measures the portion, or %, of an investments performance that is the result of the S&P 500’s performance.

Audacity's R-Squared: 12%

Benefits of LOW R-Squared

Strong positive performance is NOT dependent on the S&P 500 going higher. For nearly every high performing fund of the past decade to continue going higher, the S&P 500 must continue going higher. That is NOT the case for Audacity as it’s low R-Squared suggests it can perform well regardless of the S&P 500’s performance.

An additional benefit of investment strategies with a low R-Squared is the possibility of reduced losses during times when the market is down. During the past 10 years, the S&P 500 has been down 33 months. During these 33 months, the S&P 500 averaged a loss of -3.3% while Audacity was down just -1.0% on average during these same 33 months.

High Volatility: 2 - 3 times the S&P 500

Volatility is the biggest price you will pay for the high expected returns of the Audacity Strategy. This is a high octane strategy with significant gains and losses often occurring rapidly as illustrated in the accompanying table.

Risk of Loss

Maximum Drawdown (biggest loss ever since 1963)

  • Audacity: -40.4%
  • S&P 500: -50.9%

Although the maximum drawdown is worse for the S&P 500, the Audacity experiences more frequent drawdowns of less magnitude as illustrated in the table.

Return on $1.00

The accompanying table shows the value of $1.00 invested over various lengths of time.

Is Audacity for you? Request a Phone Call

Footnotes

Audacity Strategy is Patton’s existing hedging strategy. See: https://www.pattonwealth.com/audacity.html

All Audacity performance calculations are simulated and net of estimated fees.

Calculations are based on monthly returns unless otherwise stated.

Analysis Period: 12/31/1971 - 11/30/2019 unless otherwise noted.

See full disclosure here

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