- Terri Spath has managed mutual funds worth billions of dollars through severe downturns.
- At her new firm, she’s melding defensive quantitative techniques with a more traditional approach.
- Spath told Insider how she evolved her strategy to deliver more upside to clients.
After years of helping investors thrive by playing good defense, Terri Spath says she’s added offense to the mix.
As a mutual fund and portfolio manager at firms including Franklin Templeton and Sierra Advisors, where she was also chief investment officer, Spath built a track record of outperforming the market during downturns like the dot-com crash, the Global Financial Crisis, and the COVID sell-off.
Today, as the founder and investment chief at Zuma Wealth, Spath says she’s combining the best parts of the approaches she learned earlier in her career, using the quantitative techniques Sierra favored as well as the fundamental analysis she learned at earlier stops like Franklin Templeton.
She says that has helped Zuma post flat returns in April when the S&P 500 fell almost 9%.
“What I’ve got now as a decision process is that intersection of both fundamental analysis and quantitative metrics to determine is this not just the right thing to buy, but is it also the right time to buy it,” she told Insider. “You can uncover cheap stocks all day long, but if you do not buy them at the right time or sell them at the right time, then it can just be dead money for a very long time.”
Spath says the marriage of those styles helps her find stocks that are just beginning to rise.
In 2020 Spath told Insider that moving averages were the foundation of Sierra’s defense-oriented approach, and she used those averages to identify sell signals that tell her when it’s time to get out of the stock market. Today, Spath says those are still an important tool in her arsenal.
While quantitative analysis is helpful in preventing meltdowns with a momentum-focused approach, she says it does not answer the vitally important question of when to buy. While the selling on Wall Street is settling down, she’s holding large amounts of cash and waiting for clearer ‘buy’ signs.
“There are certain crossovers that make sense for most stocks to help decide whether it’s a good time to buy or whether you’re just catching a falling knife,” she said. “When does the nine day moving average, for example, cross over the 18 day?”
But Spath says there are some bargains already, including Home Depot, Starbucks, and JPMorgan Chase, while names like Wells Fargo and Charles Schwab may be bargains but do not look ready to break out yet. Using those traditional approaches also lets her cast a wider net than she could in the past.
“If you sharpen your pencil and start to do some homework, there’s some blue chip S&P 500 companies that are within 5% of their 52-week lows. They pay a decent dividend, and they are in a sweet spot for their price to earnings ratio, “Spath said.
Energy companies are very appealing, she adds, but she does not want to overload her clients’ exposure to that volatile sector of the market. Spath also recommended the Invesco DB Commodity Index Tracking Fund, which tracks a basket of commodities and benefits from the strength in the US dollar.
Some alternatives are also performing reasonably well as she waits for an opportune moment to buy more stocks.
“You can park money in merger arbitrage funds right now, and you’re going to make a nice, steady return,” she said. “And managed futures, believe it or not, have been something that we’ve put money into.”