Mallach Strategy

1 reply [Last post]
SJS's picture
Joined: 2012-10-18

I came across some info regarding the Mallach Strategy and was very interested in researching/using the strategy but had a few questions. As far as I know the strategy was created by David Mallach who is with Merrill Lynch and is based on Merrill Lynch analyst information, but I am not with Merrill Lynch and am with a different firm. Knowing that the quality of information is obviously important to the success of the strategy and without having access to the ML info I was looking for information on where the best place would be to obtain the information needed to implement the strategy such as following analyst future/past earning estimates revisions and any other info that would be relevent to the strategy. Any further info and any help with this would be greatly appreciated. Thanks.

Daniel Felton's picture
Joined: 2015-10-01

Mallach, who has spent his entire career with Merrill Lynch, is known for designing two investing strategies, based on exhaustive Merrill research and used worldwide by advisors. The growth strategy focuses upon revisions in earnings estimates made by security analysts. To qualify, a stock has to have had its earnings revised upward twice in six months. To work effectively, 10 or more stocks are recommended in a portfolio

"Instead of the price, I look at what's causing the price to move. We don't look at the subjective opinion of analysts but quantitative numbers. When analysts revise forecasts, you can make money. Thousands of advisors have built their career around this," says Mallach, whose book, Dancing with the Analysts, published in 2002, wraps the growth strategy in a fictional thriller.

"It's like flying. All the risk in flying is ahead of me. If I'm flying to Atlanta today and you hear me talking to the weather experts, I'm not going to be asking what the weather was like last week in Atlanta. You want to know how the weather pattern is about to change ahead because that's where the risk is," adds Mallach, who has two sons who work as advisors for Merrill. "It's more valuable than historical data."

A second strategy, focusing on income and growth, invests in the common stock of telephone and electric utility companies that increase their dividends at a rapid rate. Merrill's research suggests that when utility companies raise their dividends rapidly, a move reflecting management's optimism regarding future performance, their stock price also tends to rise. Mallach's new novel, Walking with the Analysts, due out next year, will feature income investing in a plot twist.

With an average account size of $3 million, Mallach's clients -- individuals, institutions and Middle Eastern royalty -- span the globe. Twenty-five percent of the assets he manages are tied to clients from the Middle East. Not surprisingly, one of his strategies follows the tenets of the Quran.

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