The "Dream Team" is the list of companies selected by Emperor's algorithm – according to the criteria that we believe define a "wonderful business".
The advantage of stock selection by algorithm is that it avoids the following, among many:
- Anchoring: an algorithm will never make a decision based on preconceived beliefs about a company,
- Regret aversion: an algorithm will not actively try to avoid the displeasure that comes with potential loss,
- Disposition: an algorithm will not hold shares for longer than necessary, or sell shares before necessary,
- Hindsight: an algorithm will not act differently based on past results/speculation,
- Familiarity: an algorithm has no incentive to stay "safe" by investing in the familiar, instead it will always ensure a properly diversified portfolio,
- Self attribution leading to confidence: regardless of whether its actions result in good events or if its effort result in bad outcomes, an algorithm will not "lose confidence",
This area of finance has been rewarded with two Nobel Prizes. No emotions move our algorithmic stock pickers, the algorithms tell us what to buy and, rarely, what to sell based on the criteria we have set up.