The Dynalect Strategy

Here at Dynalect, we’ve spent the last few months developing and fine-tuning a unique investing strategy that combines strong elements from a variety of investing traditions to create a stable and profitable buy and hold portfolio optimized for young investors. Investing can be a hard game to play, especially for first-time participants, but we’re committed to doing the heavy lifting for you so that you can go straight to the enjoyable part of watching your money grow.

For the sake of transparency, we’d like to take a moment before moving forward to summarize the main pillars of our strategy and to provide an account of a few upcoming structural changes affecting the way we publish reports.

So let’s start with the strategy. Since the beginning, Dynalect has taken a top-down approach, identifying industries with high growth potential, then choosing specific companies and assets that are best prepared to take advantage of industry growth. We like to take a diverse stake in well-performing industries, identifying all key players including direct competitors to ensure that our portfolio represents overall performance. Also, since mid- to small-cap companies tend to have higher average growth rates but greater risk individually, we aim to invest in a large number of smaller-sized companies to spread risk and lower the volatility of our portfolio in aggregate, while still taking advantage of their generally greater potential for growth. Our in-depth analysis of individual companies combines a quantitative look at driving fundamentals with qualitative cultural and technological information to determine which of these companies are best poised for medium term gain, which we then suggest to you and add to our own portfolio.

At the end of the day, we practice a passive buy and hold strategy with our securities, which means once we’re in, we’re in for the long term. Decades of economic study have proven that active investing, the technique of buying and selling over the short term based on predicted temporary movements in stock price, is a surefire way to lose. We recommend stocks on the basis of potential for growth and profit for at least a few years to come. Except for periodic maintenance trades and small fine-tuning adjustments, we consider it more profitable to allow our investments to work for us in the background instead of exerting an active managing force day in and day out.

To read more about how each pillar of Dynalect’s strategy works, head over to our Investing Strategy Guide!

To better match our investment approach and renewed dedication to quality and depth, we’ll be changing our schedule, taking more time to review and analyze each industry. From here forward, we’ll dedicate each month to a particular sector of the economy.

For the past several weeks, we have been publishing fairly lengthy reports on a particular industry every two weeks. The information in these biweekly reports has come from original research such as interviews with experts and consumers in the industry, data analysis, and general reviews of existing research.

With each report, our research techniques are becoming increasingly advanced, informative, and labor-intensive. In order to provide you with high quality market analysis and stock recommendations that reflect serious and in-depth research, we have decided to lengthen our publishing schedule to one major report every month, with weekly updates. We’ll outline this new schedule below.

Week 1:

Market Overview Research

General research on the current state of the chosen industry. This includes different companies (new, innovative, established, or in decline), total revenues generated, connections to other industries, production numbers, etc.

Consultant Research

Research on leading individuals in the selected industry. This includes academic researchers, business professionals, and experienced consumers. This research will drive our next phase, which involves contacting and interviewing these individuals.

Weeks 2 and 3:

Fundamentals and Company Research

Research all relevant companies in the chosen industry. This involves fundamental analysis along with industry positioning and competitiveness, revenue plans, and company leadership.

Interviews

Interviews regarding the current focus and future direction of the industry. These interviews are with industry professionals, researchers within the industry and academia, and consumers who are well-informed about the movements and products within the industry.

Market Projection Research

Research focused on determining where the industry is heading in the next five to ten years. This involves data analysis, qualitative analysis, and projection.

Week 4:

Monetization

At this point, the Dynalect team will review and synthesize all previous industry research (interviews, fundamental analysis, data analysis, etc.), and use this to put together a focused list of recommended companies most able to take advantage of the trends we’ve identified in the chosen industry.

At the end of this week, we will publish our final report.

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