Why Fundamentals Don't Work For "New Economy" Stocks | Jacob Pozharny

Why It Matters

Understanding the limits of traditional fundamentals and leveraging sentiment analytics enables investors to spot mispriced new‑economy stocks, potentially delivering superior risk‑adjusted returns in a market dominated by intangible assets.

Key Takeaways

• Sell‑side analysts vary; identifying top predictors yields early EPS consensus
• New‑economy firms' intangibles break traditional fundamentals‑valuation link in pricing
• Bridgeway splits stock selection: sentiment for intangibles, fundamentals for old‑economy
• Sentiment metrics include buy‑side borrow data and sell‑side analyst performance
• Global sentiment shifts reveal mispriced opportunities across countries and sectors

Summary

The video explores why classic fundamental analysis fails for "new economy" stocks—companies heavy in intangible assets such as software, biotech, and semiconductors—and how Bridgeway Capital adapts its investment process. Jacob Pozharny explains that traditional discounted cash‑flow models misprice these firms because earnings and book value omit R&D, customer relationships, and other intangibles, leading to a flat or negative correlation between price‑to‑book multiples and return on equity.

Bridgeway’s research shows a clear bifurcation: old‑economy sectors still obey the classic valuation‑profitability relationship, while new‑economy sectors do not. To capture value, the firm relies on a contextual stock‑selection framework that emphasizes sentiment analysis for high‑intangible industries and fundamentals for low‑intangible ones. Sentiment is measured through seven metrics, notably sell‑side analyst predictive power and buy‑side borrow‑availability signals, which reveal where consensus EPS forecasts are likely to move before the market reacts.

Pozharny cites a scatter‑plot illustrating sentiment shifts versus country returns, highlighting that Brazil, Taiwan, and Indonesia exhibit strong positive sentiment not yet priced in, whereas South Africa and Australia show negative sentiment despite decent returns—signaling short opportunities. He emphasizes that identifying “good” analysts—those whose forecasts consistently predict actual earnings—allows Bridgeway to anticipate consensus changes and gain an edge.

The implication for investors is clear: relying solely on fundamentals for high‑intangible stocks can lead to systematic underperformance, while integrating sophisticated sentiment signals can uncover mispricings across global markets. Bridgeway’s dual‑model approach aims to exploit these gaps, offering a template for asset managers confronting the evolving dynamics of the new economy.

Original Description

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In this episode of "Monetary Matters," Jacob Pozharny, Co-Chief Investment Officer and Portfolio Manager at Bridgeway Capital Management, explains why traditional fundamental analysis often fails "new economy" stocks due to the rise of intangible assets like R&D and customer relationships. He details a bifurcated investment strategy that utilizes advanced sentiment analysis for high-tech sectors while maintaining a classic fundamental approach for "old economy" industries. The discussion highlights how the 2026 Iran war is currently creating significant market dislocations in global energy and shipping, offering unique "alpha hunting" opportunities identified through proprietary textual analysis of earnings calls. Pozharny argues that the most effective stock picking occurs in less efficient mid-cap and small-cap markets outside the U.S., where the potential return spread is significantly wider than in the S&P 500. Finally, he outlines his firm's market-neutral approach to building idiosyncratic return streams that remain uncorrelated to broader market direction by leveraging unique data such as buy-side borrow availability. Recorded April 16, 2026.

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Past performance is not indicative of future results. An investment should not be made based solely on returns. Before investing you should carefully consider the Fund’s investment objectives, risks, charges, and expenses. This and other information is in the prospectus. Please read the prospectus carefully before you invest which can be found on unlimitedetfs.com/HFGM. Distributed by Foreside Fund Services, LLC

Timestamps

00:00 Intro

00:43 Unlimited $HFGM Pre-roll

01:24 Fundamentals Don't Work For "New Economy" Stocks

16:14 Sentiment Misalignments Across Countries

25:23 Unlimited $HFGM Mid-roll

27:20 Sentiment Misalignments Across Industries

50:35 Shipping & Energy

1:16:50 About Bridgeway Strategy

1:23:10 Unlimited $HFGM End-roll

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