Shopping For Alpha In Consumer Retail

Can analyst forecasts of industry-specific metrics generate alpha in a cross-section of returns in that industry? In this 45-minute webinar, Visible Alpha’s head data scientist discusses findings from a recent analysis:

• Two popular retail-specific metrics, comparable sales and operating margin growth, generate significant long/short spreads in U.S. consumer retail portfolios.
• A long/short strategy taking positions only in what analysts believe to have better- or worse-than-median comparable sales and operating margin growth together has yielded 1.2% monthly alpha since 2017.
• The excess returns disappear when these two industry-specific KPIs are replaced with more generic accounting metrics, such as revenue growth and net margin.
• While comparable sales expectations today are a little shy of converging to the pre-pandemic norms, the operating margin expectations still have a ways to catch up.

Participants learned about the evidence our data science team uncovered that demonstrates the value of systematically incorporating analyst expectations of industry-specific metrics into quantitative factor models.