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Retail Analysts Are Smarter, Brooker Belcourt Has Proof (Szn 4, Ep. 14)

Last updated on May 31, 2022

Brooker Belcourt, CEO of Covey, joins the podcast to discuss his analyst platform and its ‘alpha algorithm’ that has been able to produce outperformance through its stock and ETF picks and crypto calls.

Content Highlights

  • Covey’s contrarian thesis: Retail analysts are every bit as good, if not better, than institutional analysts (4:10);
  • The idea of a platform to aggregate analyst opinion is not new. But very recent history has proven Covey correct: its analysts predicted the drop in cryptocurrencies and rise in value stocks over that have transpired over the last week (5:53);
  • The ‘alpha algorithm’ and how that works (6:58);
  • What is Covey’s algorithm picking up right now? (11:03);
  • Some highlights: Long commodities, fertilizer stocks like Mosaic (MOS), financials, energy stocks, and a few beaten-up tech names like Facebook/Meta (FB) and Alibaba (BABA). Short cryptos has been taken off (14:46);
  • Isn’t Covey just chasing past performance hoping for future results? (17:20)
  • Great investors appear to have staying power, regardless of environment (23:27);
  • Background on the guest and how he came to start Covey (28:11);
  • Deeper discussion on how Covey’s top analysts are positioning their portfolios right now (36:39);

For More Information

Video Highlights

Transcript

Nathaniel E. Baker
Brooker Belcourt, CEO of Covey, thank you so much for joining the contrarian investor podcast here. Today. This is actually our second attempt at recording this a week ago, we had a basically a failed attempt. But I want to talk about that in a minute. But first of all, you have a long history on the buy side yourself. But you’ve started this firm. Now Covey. And the premise is, and this is a very contrarian premise. And it is that retail investors are every bit as smart, not just as sell side analysts, but actually, as buy side analysts, people at hedge funds, and you worked at it as a head as an analyst at hedge funds on the buy side, so you would know. So let’s maybe start. Tell me about that. Tell me about how you what you are, your prospects are here, how you do that. And then we’ll get into markets because a lot has been going on. And I want to get us caught up on some of what your calls were last week when we first spoke. But let’s start first, tell me about coffee and how that how this works.

Brooker Belcourt
Thank you for having me here. It’s great to be here. Our contrarian thesis is that retail analysts are every bit as good as institutional analysts. And you know, I’ve built Covey on this premise. And we have some really interesting data to back up that thesis. And I’d love to share that with you today and jump into what it means to have this exceptional group of individuals that we can draw a lot of knowledge and debt and value from.

Nathaniel E. Baker
Okay, cool. So basically, you Yeah, talk to me how this works, you have these individuals that provide their analysis to you in this and you basically aggregate it. So yeah, tell me about that.

Brooker Belcourt
Yeah. So first, you know, what is Covey? coveys is open to anyone, it’s, it’s a free software where anyone can join, create a virtual portfolio, you don’t have to connect any brokerage account, create a virtual portfolio, and every month, we reward the best analysts on our platform with with tokens of cryptocurrency, you know, we’re creating this community with the goal to find the best analysts for anyone to copy so that you know us as a community can generate more wealth.

Nathaniel E. Baker
Okay, okay. I mean, that’s pretty common. There’s a lot of these these happening. But now, what is your special sauce? And how does it because you’ve had some calls here already that that I touched on it, as we record this here on Wednesday, May 11, markets have been taking a beating. And you basically call this and especially the crypto sell off? When we spoke a week ago, you said to watch for this? And so what is yeah, what is the special sauce? And how are you able to get this?

Brooker Belcourt
Yeah, so I think there’s definitely a lot of other places where you can have these virtual portfolios. I think there’s a lot of social apps coming up with it. And they publish things like the most popular stocks of the day are the biggest buys and sells. And you know that data is interesting. But you know, when we look at it, we’re like, Well, can I make money off this data? And the answer is usually no. And that’s because they’ve got this community that’s like roughly equivalent to the market. And it’s just showing what the markets buying and selling in that given day. And I think the real value from having, you know, a transparent community is coming up with a way to rank all the different analysts in your community and have incentives for them to be at the top. And so what we’ve done is we’ve come up with a, you know, community governed way of rewarding our analysts. And so we call this thing the Alpha algorithm. And it takes into account obviously, your performance, but also, you know, your position, hit rate your position slugging just, it’s a good way to try and evaluate analysts on a really short term basis, and pay them a monthly while thinking about a long term. So we have this alpha algorithm that ranks the best. And you know, the biggest takeaway we had was that in the top 10%, we kept rewarding the same analysts over and over again. So we’ve, you know, hundreds of people in our community, and it was the same group of people that would receive rewards month in and month out. And so we thought that was really interesting. And so we started to dig a little bit into like, what that actually means.

Nathaniel E. Baker
Okay, now how far back does that data go? Because, as you know, analysts and analysts in one type of a market can be very good. But then when things shift, that same analysts can be less good. So how far how long you’ve been doing this?

Brooker Belcourt
Yeah. So we launched Covey, about a year ago, and we launched this community that rewards analyst in September. So we’ve got about eight months of data. And you know, already, we’re seeing, like, really fascinating things where, you know, if you think about it, if the market was totally random, and, you know, we were trying to predict the top 10% of analysts in any given month, we would have about a 10% shot of predicting them if the market was totally random. Now, obviously, you know, you and I believe that the market is not random.

Nathaniel E. Baker
And I’m not convinced, but go on.

Brooker Belcourt
It’s true. So, you know, what we did is we looked at the data, and anecdotally, we saw the same people getting paid in the top 10%, every month. And so we thought, well, what could we predict, you know, next month’s Top 10% Better than just randomly, right? If you’re, if it’s totally random, you’d have a 10% shot of picking the top 10%. And we found that, you know, looking at the historical data, we could predict the top 10%, we could predict about 40% of that. And so we were like, you’re very getting like very statistically significant results of using track records to predict the next month. Great, great analysts.

Nathaniel E. Baker
Hmm. Interesting. And I like you. So you see, you have a hit rate and then a slugging ratio. So that brings in baseball terms here, which I’m not going to explain but well, except to say very quickly, like slugging is basically measures power as well as just hit. Can you talk about that and how that works?

Brooker Belcourt
Yeah, so we are talking about as the Alpha algorithm created to reward analyst. And so you know, when we first built cavae, we wanted to reward analysts. And we thought we could just use total percent gain in the month. And then quickly, we found out that the analysts started to game us and would use, like, insane leverage and take crazy amounts of risk. That didn’t really make any sense. And so we came together, and we thought, Well, is there a better way to judge someone on a monthly basis than percent performance? So we started to add in position hit rate, which is, you know, total positions that are profitable, divided by total positions, like number of positions, that’s hit rate. And then we thought, well, actually, you know, someone can have a really high hit rate. But maybe they’re not like doing exceptionally well on any of them. And there’s another type of investor that, you know, maybe they only get like two out of 10 stocks, right. But when they get it, right, they are phenomenal, right? There’s more like, almost VC style investing. And that’s what slugging does is a slugging takes the total gains on profitable positions, divided by the total losses on losing positions.

Nathaniel E. Baker
Interesting. That’s great. Okay, that’s really interesting. I want to come back to cover in a bit. But let’s first bring the markets into this. And as I mentioned, at the top, it’s been a difficult time, a bear market. I mean, we’ve had a bear market and tech for several months. Now. The s&p is not quite there as record this. It could get there by the end of this recording, who knows. But what are your and I touched on before that you were picking up a week ago on bearish crypto and bullish value signals? What are you picking up now as we record this, around midday on Wednesday, May 11?

Brooker Belcourt
Yeah, so let me jump into like giving you a little bit more evidence that this thing works. So we were talking about how I was able to predict, you know, the top 10% to a greater degree than being a totally random market, right, a 40% shot of predicting the top 10%. And so if you take that, like another step forward, and you say, Okay, well, if I know that who these people are going to be in the next month, why don’t I just invest in that. And so we created a portfolio that would take, you know, the top 10% of analysts in April, and invest in them on May 1, without knowing what they’re going to do. And so we did this, you know, over and over again. And we started it back in November, once we start to get some data. And if you take the results of this group of analysts, so investing in you know, the top 10% of the prior month and seeing how they do over the next month, and constantly refreshing this every month, you know, we found that our group is up like 35% right now, and that’s phenomenal. When you think about the market as you’re saying is down. You know now NASDAQ 27 s&p 17%. And so they are like dramatically, outperforming the market. I think that’s like a huge conclusion. And you know, we should talk a little later about know what this means. It’s been described like academically as it’s called, like performance persistence. And it’s this really cool phenomenon that’s been observed in hedge funds, mutual funds, private equity, and even in retail investors. And so it’s this phenomenon of saying, if you, you know, find the best investors and invest in them in the next month, they will outperform the market. Like, anecdotally, we kind of noticed, you know, people are investing in Warren Buffett, based on his track record, on the belief that he will do great in the futures like we, we’ve kind of know it exists. And there’s a great book called Super forecasters, which describes this with like, political forecasting, we know about it, it’s definitely observed. There’s just no place where we can like create a community around this phenomenon. And so that’s what’s Covey’s done. And the cool thing is, you know, we’ve created this transparent meritocracy. And once you get everyone in the community, believing that you can have some really interesting takeaways, you know, to answer your question, no, we, we can see what these top analysts portfolio looks like right now. Right. And I think that’s one of the more fascinating things, you know, to your viewers, and to a lot of people contributing to our community. Yeah. So

Nathaniel E. Baker
tell me what does go to the look like right now? Yeah. And

Brooker Belcourt
so, you know, we talked a week ago, and, you know, back then they were, you know, long commodities, you know, long like energy stocks and, and then long beaten down tech stocks and, and value stocks as well. And then short crypto, you know, that trade was up 4% Since we last talk, and where the markets down like four to 5%. And so that worked out really well. I would say the portfolio looks very similar, right? It’s again, it’s long commodities and like the fertilizer stocks, MLS NTR it’s long, you know, financials, long energy stocks, and then long some of those beaten up tech names, like Facebook, and Baba, and what you’ve done, is they taken off the crypto exposure, or there is no Long’s a no shorts in crypto, which is really fascinating, because our group is, you know, definitely a little bit leans over index on the crypto side. And they’ve done particularly well because of that, and this is one of the few times that they just have no exposure on it.

Nathaniel E. Baker
When you say crypto You mean the actual cryptocurrency is not stocks, like coin base or just Bitcoin in theory? Sure. Okay. Okay. Wow. Okay. That’s, that’s fascinating. When did this change occur or with with crypto, but although it sounds like they’ve gotten a little more positive, here, or at least less negative over the last week, where they were outright short a week ago, and now they’re just neutral?

Brooker Belcourt
Yeah, it’s definitely, you know, it’s changed a lot. I think, for a long time, they were writing crypto up. And then in the last month, as the growth stocks have started to tank, you’ve seen them go off and go negative. And now they’re, they’re taking it off. And I think it’s, you know, we also have this other data set, which I think is is really fascinating is taking the flip side of it and saying, Well, what would if I took the bottom 50% of analysts, and I invested in them in the next month, you know, how does that portfolio do? And I found myself I’m hanging out in the bottom 50% Right now, my portfolios, not doing so great. And, you know, I’m not trying not to be hurt by it, but it’s, you look at it and just being purely objective, that portfolio investing the bottom 50% is down, you know, 30 to 40% this year, so like more than the NASDAQ. And, you know, what they’re holding now is is their, you know, long the growth stocks, all gold. And they were quite long crypto for a while and to the last week, they are selling crypto pretty aggressively, but they still have a rather outsized positions in crypto

Nathaniel E. Baker
to maybe some capitulation, their crypto, but this whole thing, I mean, isn’t this just, you know, kind of the premise that past performance will provide future results is not ultimately your bet here. If you’re if you’re investing in the people that performed well in last month. Yeah, it’s,

Brooker Belcourt
it is it is essentially that it’s basically saying, you know, there is no other better way To find out who is a great analyst, other than past results.

Nathaniel E. Baker
I guess that’s fair enough. But I mean, you mentioned Warren Buffett at the outset, there’s only one Warren Buffett, and even hedge funds. And you may know this, like from, from my past life of covering hedge funds. As a reporter and editor, I looked into this pretty closely about how well they had performed over time. And there’s very few, you can count them on one hand, that have that I know of that have over like a, we’re talking like multi decades, over 20 years or 30 years that have managed to beat the market consistently. I mean, I could name one of them is Renaissance, you know, and then there’s a couple other ones, but how do you adjust for that? And those are some of the smartest most well compensated? Certainly, people in the world, right? And so how is it that retail, guys and women are able to beat that?

Brooker Belcourt
Yeah, it’s a really great question. So being totally honest, your coffee’s been around a short period of time, yeah, it’d be crazy for me to just say, Hey, this is what we’re seeing now is going to exist forever. Like, we know, our top 10% outperform right now, we don’t have that much data. So I had to dig deeper into this thesis, because it’s a big part of, you know, our community. And there’s been tons of research on this. So academic research on it. And, and, and, you know, obviously, everyone’s trying to find the next great manager. So I think it’s a very well covered topic, and what the phenomenon you’re describing is called performance persistence. And I know, it’s been studied really heavily. And, you know, one of my favorite studies is this one done by these Harvard PhDs. And so they somehow got a hold of retail brokerage data, and they looked at it, you know, over a long period of time. And, and the key takeaway of the study, you know, can individual investors beat the market is that there’s this positive correlation across time between the performance of different accounts. And so basically, they saw that those in the top 10% outperform those in the bottom 10% by about 8% a year. And so doing a similar strategy that we talked about a covey would get you like 8% of alpha. And this study, you know, is really amazing, because it’s hard to get all this data together. But people have also done this for like mutual funds, and retail investors, mutual funds, and hedge funds, and even PE, and they do notice this phenomenon. And, and they’ve noticed that like, the track record, has been a better indicator of future performance, then like, what school they went to, or like, what firm they’re at, it’s just, it’s literally the track record, like you even see it across individuals moving across different funds. And if you follow that track record, they did a great study on private equity, where you can actually see that

Nathaniel E. Baker
that’s fascinating. Okay. What do you why do you think that is? Is it just that there? Is this ability to pick stocks are making investments that some people just have and others don’t? Or is it as simple as that?

Brooker Belcourt
You know, from my personal experience, so my background, I was at Citadel most recently as an analyst, managing an Internet book there underneath a pm and a consumer group. And before that, I was at a tire car before that, I was at Cotu. And when I was interviewing candidates, and you know, talking to tons of different people, I could never find like one thing that would let me know, if someone was a great investor. They talk about all different things, they come in all shapes and sizes, it is so hard to find something that would allow you to know who is really great. And the only way that we knew was was track record. And so I think that’s, it’s just, it’s the best thing we have is it like, is this amazing thing that can predict everything? No, but it does exist in the top. And I think, if you think about like sports analogies, that’s really helpful. Right? If you think like the people who are, you know, great athletes tend to stay great athletes, like the turnover of the top 1% of athletes is actually relatively small. And, you know, obviously, there’s not many people question whether you know, baseball or football or like, an efficient market. We believe it’s not that efficient. But you know, you see that same phenomenon show up there. And so if you think that like, investing could be in some ways, like not efficient, then, you know, the best way to find the great ones is to look purely on the data, much like the best way to find the great athletes is to just look at their their data. There’s Statistics.

Nathaniel E. Baker
Yeah, but that analysis is kind of incomplete because the athletes like Tom Brady, obviously the best quarterback, whatever the rules, they might change a little bit over time, but they’re not going to be changed from one day to the next without announced without any kind of predictions and it’s not like he’s going to in the middle of a game, all of a sudden, he’s gonna have to go up field, or like all of a sudden, he’s only going to have two downs, or something like that, which is kind of what you have to deal with. As an investor. Things change from one minute to the next. Entire premises are thrown out. And we’ve seen this and how things quickly things can turn. And so it’s like the rug gets yanked out from under you. But I guess they’re able to do it anyway.

Brooker Belcourt
Yeah, it’s, there seems to be this phenomenon that the great tend to stay great in, in any environment. And I’m sure if you ask Tom Brady, who would argue that the probably the circumstances change a lot more than then we would believe from what Yeah, but Tom

Nathaniel E. Baker
Brady is shilling Kryptos. Let’s not forget about that. But well, yeah, yeah, sure. Okay. No, that’s, that’s, that’s why this is all very interesting. So I mean, last question on this, before we go to break, what have you been able to find any type of quality that does allow you to identify? Is it other than track record? Is there anything else that these people have in common?

Brooker Belcourt
You know, what, definitely not. I think, what, what we really want to encourage is the copy is open to anyone it’s totally free to use. And we have found that the the people uncover who are great, are not similar in like any other ways to the other people who are great they are. Some of them are technical analysts, some of them are pure fundamental. Some of them are like swing traders, it’s they they come in all different shapes and sizes. They’re from all over the world. There’s like very few ways. And I think that’s the best part is like, it’s a pure meritocracy. It doesn’t matter what school you went to. It doesn’t matter who you know, if you’re good at investing luck and ask questions, I’m just going to trust that your track record is going to be better than any way I can find to pick you out.

Nathaniel E. Baker
Yeah, I guess this doesn’t bode well, for the rest of us who have not had very good performance in our investing careers, whether we were professionals or amateurs, and you know, how they say you should learn from your mistakes. And maybe that just doesn’t matter. Because if you keep making them, you’re just maybe not that good.

Brooker Belcourt
Yeah, it’s no, it’s really interesting. It’s been like, it’s, I’ve learned a lot, I have not found myself in the top 10% consistently. And so I still love investing, I’m still going to keep doing it. But now I’m more focused on trying to find these best ones and allocate more of my wealth to them. So that I can benefit from the upside to their investing strategy. And you know, I can always play around with a little bit on my own. But like, just because I love something, doesn’t mean doesn’t mean I need to be playing in the major leagues with everyone else and getting my ass kicked every day. I can, I can actually, like, you know, bet on other people to do that work for me. And I think it’s just been really hard to find those great people for so long.

Nathaniel E. Baker
Sure. All right, fascinating discussion here. Brooker Belcore thanks so much. Let’s, we’re gonna come back. I want to come back and get into this a little bit more, and especially if we can pick some more stuff out of the markets in terms of individual stocks that may over underperform over the next I guess, couple of weeks or so. And the time horizon on your thing is 111 question that I have when we come back. But I first want to take a quick break and give our sponsors a chance to make themselves heard. If you are a premium subscriber, do not touch the dial, you will not get the break. Don’t go anywhere. We’ll be right back. In fact, we already are. Or Welcome back everybody here with Brooker Bellcore, CEO of Covey broker, this is the section of the show where our guests tells us more about themselves, their background, how they came to investing, and how they came to their current station in life professionally. I know you hail from Canada, right. But But yeah, so you don’t have to go back all that far as far as you want to take us but what is your origin story? To put things into Marvel terms here?

Brooker Belcourt
Yeah, let me just work my way backwards. So first, you know, I’m the founder of coffee and coffee is this analyst own community created to find and reward the next top money managers so that anyone can copy and you know, everyone can generate more wealth. And so, know how I got to this place was first it started with just a passion for investing. You know, I have been working at hedge funds for the last six or seven years. Most recently I was at Citadel is an analyst there. You know, before that, I was at a tiger cub. And before that, I was at Cotu. You know, investing in a lot of FinTech and internet stuff. arcs or like, you know, highly liquid publicly traded stocks. You know, I started my career at Goldman in investment banking in the FinTech space in 2008. And so right when chaos of a year to start, yeah, yeah. And so, you know, it really comes down to, like, I just, I absolutely love investing, you know, I worked my way through all these different hedge funds and, and learned a ton and, and saw that all these great people who were like the top investors at these different hedge funds, you know, I couldn’t really tell how they got there, they all have these different backgrounds, there wasn’t like one stereotype that fit them all. And so when I left the hedge fund world, I kind of had that idea in my head. And, you know, I started trading around in cryptocurrencies and I started having some decent trades, this was in 2019, before things were to liquid, and it became a little harder. But I started to, you know, have some decent trades and thought, hey, maybe one day I could become a manager and start a fund out of this. But there was no tool that allowed me to have a track record that was shareable to anyone. And so, you know, how can I launch a fund, if I had all these, like different accounts and all these different exchanges, and there was no one place to consolidate them, I didn’t really want to connect all my brokerage accounts, to some, you know, untrusted website. So I built Covey for myself. And I thought I could build start building a track record. So I started posting my trade ideas on a blockchain. And so I thought, hey, if I have all these ideas out there on a public immutable ledger, that will be proof that I did what I really what I said I did, and I then created a website that took that data and gave me like hedge fund level analytics. So you’ll 50 metrics every five minutes. And so that way, I now had like an immutable track record, and shareable portfolio analytics that I could give to anyone. And so that worked great for me, and, and then people started using it. And, you know, we had a lot of students come in to Covey to use it to learn how to become better investors, and then some professors started using it, then students wanted to use it to get jobs. And then some hedge funds wanted to use it internally, to be more transparent about their analysts ideas, and give them, you know, accountability to their ideas. So all of these use cases, started to spin off this, like really sophisticated, you know, mock portfolio software, backed by an immutable record on the blockchain. And so, you know, where it really clicked, is when we started rewarding people in September, on a monthly basis for their performance. And that was awesome, we started to have incentives for people to do better. And then we started to see this, this incredible data show up where these this top 10% of analysts were doing so well. And so we really now devoted ourselves to building out this community. So that we can generate, you know, insights and how to invest better and we can really, you know, create this, like, nonzero sum community where we can all do better by sharing our ideas in a transparent meritocracy. And, and, you know, we’re building products towards that vision of investing in the best online.

Nathaniel E. Baker
Hmm, very cool. And so, so this is actually built on blockchain technology.

Brooker Belcourt
Yeah, so we, you know, for Covey, it’s super easy to use, you just anyone can join, it’s totally open, we really want to make sure it’s really easy to use, you just joined by creating a portfolio like Facebook 10%, Google 5%, IBM 5%, and hit save portfolio and we handle all the blockchain stuff for you. And so what we do is, every time you place a trade, we record that on, on some blockchains that are etherium compatible. So the blockchains are, you know, polygon and scale. But you know, we handle all that. And then at the end of the month, if you’re one of the best investors on the platform, we reward you. And we also use the blockchain for that, because we have investors in Australia and Ireland, and we have no way to get the money other than using an Aetherium address. So it’s super efficient for paying out all these people for their great work.

Nathaniel E. Baker
Too bad that the market has been eating into those, the what the payout is from, yeah, but whatever. So how many people do you have now on the platform?

Brooker Belcourt
Yeah, so in a given in a given month, we’ve got you know, over 100 analysts competing, and you know, they’re going for I think it’s like a few $1,000 in rewards right now. And and Those get distributed right at the end of the month.

Nathaniel E. Baker
Okay, so a few 100. About 100. You said, yeah, that are on there. And what is their background? Like? Are they are they former by ciders? For Michelle ciders? Are they retirees?

Brooker Belcourt
I would say the consistent thing about them is they’re really passionate about investing. It ranges from the hobbyist. You know, maybe they’re a software developer or, or maybe they’re just, you know, something, you know, maybe they’re even a professional investor on the side, and they want to, you know, have a portfolio that explores an asset class they’re not into. So it really ranges in a lot of different ways. I can’t put them in any box. They’re passionate about investing. They love talking stocks, they wake up thinking about it, they watch shows like this. That’s the best I can explain it

Nathaniel E. Baker
Has it been any kind of indication as far as investing style? And which ones are more successful? Like the top 10? Are they? Are they more fundamental analysts? Are they quants? Are they? I certainly hope they aren’t technicians, because that would blow a whole bunch of stuff out of the water. But yeah, but what?

Brooker Belcourt
Yeah, the investing style. You know, there’s, there’s a decent mix, but I would say the ones who tend to do the best are the ones who have some conviction and can hang around and, and just don’t turn over their portfolio as much.

Nathaniel E. Baker
But you don’t know what they’re basing the picks on the investments?

Brooker Belcourt
we have abilities for them to share their thesis and share their models. And so you can look into that. But, you know, I wouldn’t put them into one sort of style. And I think that, you know, we judge them by their track record.

Nathaniel E. Baker
Oh, no, I get that. I was just curious if any, if anything, had emerged that anything was more more was showing up more than anything else and others.

Brooker Belcourt
They I mean, the great ones are adaptable. Yeah, there really are in the value stocks when it matters and the growth stocks when it matters. It’s incredible how they can move around.

Nathaniel E. Baker
Wow, okay. And, right. Okay. So now Alright, so now let’s talk about what this looks like now. And we touched on it. We talked about it a little bit, how you said that the the top, the top ones right now are still bullish on the value names. And now when we say value names, can we narrow that down any any further? Any particular sector?

Brooker Belcourt
Yeah, and happy to jump into it. And I think the biggest takeaway before I go into all this is, you know, a lot of the times, you know, you’re able to craft a story about how all these ideas fit together with some macro view, you know, you think interest rates are going this way, or inflation is going that way? No, we’re a collection of the best analysts purely based on track record. And the cool thing is, is they don’t fit into just one narrative. And so it’s much more diversified. Because we take you know, a group of, you know, the top 10% So if it’s communities 100, that’s 10 different people. And so they they may have a portfolio that both believes interest rates are gonna go up and interest is gonna go down and we’re not gonna have inflation, we’re gonna have inflation. So they have, they’re definitely diversified. So I’m not going to try to craft a narrative. I’ll just explain, you know, what we’re seeing what we’re seeing now. It’s, you know, it’s long as I was saying, it’s long commodities. It’s long. Utilities. Definitely like the value stocks. It’s long, you know, Intel, Baba, it’s long. A lot of yeah, a lot of like, MOS and TR. Right now. And then it’s short, basically the the NASDAQ and the name stocks,

Nathaniel E. Baker
when you say commodities. Is that Is this the actual commodity tracked by an ETF? Or is it the futures or is a commodity stocks?

Brooker Belcourt
So the way it works with coveys they can invest in any liquid? Yeah, yeah, f o r US equity, or cryptocurrency and just mostly the liquid ones. So with commodity we sell some people being exposed to uso, right, as a play on as a player.

Nathaniel E. Baker
So they are still bullish on oil. That’s interesting.

Brooker Belcourt
Okay, yeah, right now and this stuff changes and so we haven’t live on our website. And that’s

Nathaniel E. Baker
the other thing is how long do these things hold for like Yeah, I mean, markets move quick. Especially nowadays, like when you how long how often do you look at this and how how long do you think that these these the that sense? Is it on a monthly or? Yeah,

Brooker Belcourt
yeah, it’s interesting. I don’t think there’s one formula to it. I think it’s just like the way you manage your portfolio. You know, you maybe use I set out to have a hold of 18 months, but that could change in five days. And so it’s adjusted. I think, you know, when we last chatted a week ago, they were short crypto, that trade went off last night. I noticed that happened. So okay, you know, things move pretty quick, you know, we’re, you know, we’re really trying to build a better way to start tracking this data, because we’re seeing the value in it.

Nathaniel E. Baker
And so as somebody who’s on the platform, can you get onto the platform and just get access to that information without submitting anything? Or do you have to be a user as well?

Brooker Belcourt
Yeah, so we’re opening it up right now. And so if you go to cubby.io, you can see this data, you know, we’re allowing anyone to use it. And, and I think the key that makes it more valuable is that people contribute to it and start adding their picks, and hopefully, they can rise to the top. And either way, it’s this really fun, transparent meritocracy. So I think, you know, our community just has a lot of fun with this, and there’s no risk, you can’t lose any money. You can only earn rewards each month. So I think, you know, we really just want to keep it keep the fun aspect alive. And, and I think that it, it can grow in value, the more people we have, right, if you if you actually think about it, if we got, like 3000 analysts on here, you know, that would be bigger than, you know, the pool of hedge fund analysts on Wall Street. And if we took, you know, the top 10%, from there, I’m talking 300 people maybe even narrower, more like the top 1%, we’re talking 30 people that are going to be better than a lot of the top hedge fund analysts because it’s just we’re fishing from a significantly larger pool. And so I think, you know, when I said my contrarian pick is that retail is going to generate just as much alpha as institutional, it’s really the retail analysts are gonna beat them by numbers. And if this thesis holds up, that like the top, the Great Investors stay great, you know, the retail pool is open to anyone, you know, not anyone can get a job at Citadel or PowerPoint 72 or millennium. And so we can just, we can just with coffee, we can, you know, beat them by numbers, and we can create this valuable community, and, you know, gain the data from it. And, you know, we’re generally shut out of hedge funds, where a lot of the good ideas sit, you need a million dollars to be able to invest in them if they’re open. And so we need some sort of product that we can create, together. And that’s what we’re trying to do with Cubby.

Nathaniel E. Baker
Interesting, and I’m curious, I will be curious, actually, to see what the if what the curve looks like, as you ramp up as you get more people, if it if it does become even better if it stays about the same? Just based on sample size, and stuff. Yeah, I’m curious how that’s gonna work out?

Brooker Belcourt
Yeah, I think I My view is that with numbers, we should get significantly better results, and we can start narrowing it from what it is now top 10%. I think if we got down to top 1%, you know, we can launch a really compelling product off that. Yeah.

Nathaniel E. Baker
Do you suspect this was always the case that the retail was just as good as as institutional? And we just didn’t hear about it? Because retailers don’t market? Or is it something that has changed in recent years due to technology?

Brooker Belcourt
Yeah, I think that’s it’s a really good question. I think a lot of industries are going through this, like, you know, Moneyball type change, where, you know, recruitment, used to be based off who you know, what school you went to. And now it still is no getting information that is still that way. But I think now, you know, we’re starting to realize, like, hey, we can use data to evaluate candidates, and we can use data to select these amazing people and create this meritocracy. And so, I think that, you know, maybe this, you know, the retail analysts, you know, probably had that skill set before, but I don’t think there were products that would allow them to compete with, you know, the top institutional investors and even be found, like, I don’t know, I don’t know how you would find all these different style people, there was just never a product for that. And so, you know, we created that. And then there’s also with that, like, there’s obviously other products too, right? You know, before it’d be hard to compete with a hedge fund analyst if you didn’t have a Bloomberg subscription. But now there’s a lot of cool products like you know, Koi fin that allow you to have really compelling data to like a similar degree as an institutional analyst. And so there’s like this leveling up out of data. And, and then my final point on this one is, you know, when I was at Citadel, we paid millions of dollars for a lot of different data. And you know, that would be like the credit card data app usage data, traffic data and satellite data. And I think we’ve gotten to a point in the hedge fund world where like the Alpha has been squeezed out so much of that data, and almost to the degree that it may actually be providing some negative alpha. And, and so that, now that it’s level, the, you know, the ability for retail to compete with institutional is now like getting much narrower as institutional just gobbles up all this data and, and destroys the alpha in it. And so that, you know, all those things together, give the retail analysts, you know, a much better shot now.

Nathaniel E. Baker
Really fascinating. Wow, what an interesting conversation here Brooker Belcore. Thank you so much for joining me contrarian investor podcast today. Of course, as a believer in narratives, this kind of shoots a bunch of holes into that whole theory. But like we said, maybe there is, you know, I’ve always thought that there is some value to having the contrarian thesis in mind, even if you don’t actually follow it. But if your narrative is just that, you know, the best stock pickers or the best stock pickers then there you go. But anyway, in closing, maybe tell our listeners how they can find out more about you and about the product. You mentioned, the website covey.io. I’ll put all this in the show notes as well, so you can access it quickly.

Brooker Belcourt
Yeah, that’s great. Thank you so much for having me. It’s been great chatting with you. And I love listening to podcasts. And definitely I’m a sucker for a good story. So I’m going to keep listening because you know, the anything else and so yeah, the way to join Covey, just go to covey.io. It’s free. There’s no risks, come join our community start contributing to it. You can earn rewards every single month. Very cool. And you’re not on the social media at all. Yeah, we’re on Twitter as well. Oh, you are?

Nathaniel E. Baker
Okay. What’s that? What’s that?

Brooker Belcourt
Covey_io

Nathaniel E. Baker
Duh you mentioned that and I’m sorry. Yeah, no, that’s okay. All right. Yeah. Great. Wonderful. Alright. Thanks so much. Brooker. Thank you all for listening. And look forward to speaking to you again next time.