Wednesday, January 04, 2017

Cone of Probability

We are not in the business of making assumptions here at Lumen Capital Management, LLC.    Our system uses a probabilistic assessment that weighs market evidence based on three factors, fundamentals {both market and individual sector}, valuation and money flow analysis.

From this we have developed a system we refer to as "The Cone of Probability" or COP.  COP is our current assessment of the trading range within which we think stocks have the potential to trade during ta certain described time period.  It is a probabilistic assessment based on a many factors.  Some of these inputs are: Earnings estimates, and whether those estimates are rising or falling, dividend yield, earnings yield and the current yield on the US 10 year treasury.  This is not an exhaustive list of all of the variables that are used in creating the cone.  The Cone of Probability is used solely for analytical purposes.  It will fluctuate with market conditions and changes to the data inputs.  Index prices can and have traded outside of the range of the cone.  The data supplied when we discuss the cone is for informational use only.  There should be no expectation that this price range will be accurate and there are no guarantees that this information is correct.