Artificial Intelligence Dividend Growth Investing
Imagine if computers could provide an edge to investors. Well, imagine no more. Artificial Intelligence, or AI, is here and it’s here to stay.
AI is broad concept but even if you’re not sure what it’s all about, rest assured that you already use it in one or multiple aspects of your life. Do you deposit cheques into your bank account using an app on your smart phone? That’s AI. Do you ever watch a show on Netflix because it suggested it to you? That’s AI, too. How about when you start Googling something and the search engine has a list of recommendations before you’ve finished typing? You’re probably a lot more tuned in to technology than you thought you were.
Bristol Gate Capital Partners, a Toronto-based investment manager, shared a bit of AI history in a recent letter to shareholders:
A 2017 TED Talk by chess grandmaster, Garry Kasparov, is instructive. In it, he recounts his 1997 loss to IBM’s supercomputer, Deep Blue, and some of the events that followed.
Responding to the loss, Kasparov began a journey that inspired the creation of “centaur” chess, where similar to the mythological creature that combined the upper body (brains) of a human with the lower body (power) of a horse, his new game combined human intuition, creativity and strategy with a computer’s brute force ability to calculate with speed.
In 2005, a “freestyle” chess tournament based on Kasparov’s idea pitted grandmasters, supercomputers and combinations of the two against each other. Despite the significant intellectual and computational power taking part, it was a pair of amateurs that used three ordinary computers simultaneously in a unique process that won. Whenever the three computers disagreed on the next move, the amateurs would investigate further, resulting in a superior decision process to that of their more powerful competitors.
Kasparov reasoned “a weak human player plus a machine plus a better process is superior to a very powerful machine alone but more remarkably, is superior to a strong human player plus machine and an inferior process.”
What does chess have to do with investing?
Dividends, dividend growth and finding businesses to invest in at a discount to their actual value has always been a staple of my long-term view of prudent investing. If a person could take this strategy and marry it with a combination of machine learning and high powered computers to find good quality businesses consistently, would you be intrigued?
I would be. That’s why Serviss Wealth Management is proud to announce a new partnership (via Value Partners) to Bristol Gate Capital Partners.
Bristol Gate combines fundamental analysis with data science to identify companies with the highest future dividend growth. Bristol Gate uses machine learning and other data science techniques to construct portfolios with reduced risk and improved returns. Perhaps most importantly, it avoids emotional bias in the investment process. Bristol Gate was founded in 2006 and is a privately-owned company.
Here are some highlights of their investment strategy:
• 22 positions
• Equally weighted (with quarterly re-balancing)
• Proprietary methodology uses machine learning to predict the best dividend growers over the next 12 months
Another note from the recent shareholder letter:
“We’ve always believed combining the complementary strengths of tools and technology with human abilities can help make better, more consistent decisions and amplify our intelligence as opposed to replace it.”
To learn more about what investment options are available to accomplish your goals, dreams and ultimate plans, contact us to book a review meeting today.
Take care
Dustin Serviss CFP CIM CLU CHS