How Frequently to Update Price Targets

Hi, this is Cameron Hight from Alpha Theory. One of the most common questions I get is how frequently I should update my price targets. To analyze that, we took all of the data that Alpha Theory has, which is 300+ firms over almost 20 years, putting almost a billion price target forecasts into our system and broke them down into four different buckets. 

The buckets were determined by how frequently they updated the price targets. They were equal numbers of clients. What that ended up showing us was that we had four different cohorts: a cohort that updated their price targets once a month, another cohort that updated them roughly twice a quarter, another one that updated them roughly once a quarter, and another one that updated them a little bit worse than twice a year. So, that was the worst cohort from an update frequency standpoint.

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What we found is that there was a 3x improvement in return on invested capital just from going from roughly twice a year to once a quarter. There was a monotonic relationship going from once a quarter to twice a quarter to once a month. However, it only took it from the 3x improvement that we got from going from twice a year to once a quarter, to a 4x improvement over the worst cohort. So it's another one-time return. But the big takeaway, if I were to give an answer to how frequently I should update my price targets, is at least once a quarter.

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