Triple Crown Quant Screen
Find sectors with rising estimates, positive momentum, and cheap valuations
- Difficulty
- Easy
- Time to result
- ~days to results
- Steps
- 5
- Confidence
- 99%
The Triple Crown Quant Screen searches for candidates displaying three conditions simultaneously: upward earnings revisions, positive price momentum, and a valuation that is cheap relative to history. Revisions indicate that expected fundamentals are improving, momentum shows that the market has begun recognizing the change, and valuation provides room for further appreciation. After identifying a candidate, the investor investigates why others remain skeptical, whether positioning can create future inflows, and whether the business has a durable supply-demand case. Parker used this combination to identify energy as an attractive sector before adding research on ESG constraints, negative sentiment, capital flows, and long-tailed oil demand. The framework is therefore a disciplined idea generator, not permission to skip fundamental work or ignore thesis-breaking events.
Origin
Parker described the screen while explaining why energy became Trivariate Research's strongest sector call after the firm launched.
Core principles
- 01Strong opportunities can combine improving fundamentals with favorable price action
- 02Cheapness is more useful when estimates and momentum confirm it
- 03Investor resistance can reveal additional upside
- 04A screen starts the research process rather than completing it
- 05Structural demand should be tested after the quantitative signal appears
How to run it
- 1
Measure revisions
Identify companies or sectors receiving persistent upward earnings-estimate revisions. Prefer broad confirmation over a single analyst change.
Pro tip Compare the revision trend with other industries to locate relative improvement.
Watch out One temporary commodity spike can inflate estimates without creating a durable thesis.
- 2
Confirm momentum
Require positive price performance relative to the market or industry peers. Momentum demonstrates that the improvement is being recognized.
Pro tip Use relative rather than merely absolute returns.
Watch out Do not confuse a one-day rebound with a sustained trend.
- 3
Test historical valuation
Compare the current multiple or yield with the candidate's own history and relevant peers. Look for favorable asymmetry rather than cheapness in isolation.
Pro tip Use the valuation measure that best reflects the industry's economics.
Watch out A structural decline can make historical averages misleading.
- 4
Interrogate the pushback
Ask investors why they will not own the candidate and classify their objections. Determine whether those objections are already reflected in positioning and price.
Pro tip Repeated non-fundamental objections can signal a future flow catalyst.
Watch out Unpopular does not automatically mean mispriced.
- 5
Validate the business mechanism
Examine supply, demand, cash generation, and the likely duration of the earnings trend. Specify what evidence would overturn the thesis.
Pro tip Separate a multi-year setup from a short-lived geopolitical trade.
Watch out Unexpected supply growth or collapsing demand can reverse all three signals.
In the wild
Trivariate found energy had upward earnings revisions, positive price momentum, and a cheap valuation versus history. Parker then tested the signal against investor concerns about ESG constraints and oil's terminal value, concluding that demand was likely to remain longer-tailed than positioning implied.
→ Energy became the firm's biggest call during its first year, with a thesis extending beyond a short-term war trade.
Common mistakes
Buying cheapness alone
Low valuation without improving estimates or momentum may simply identify a deteriorating business.
Stopping after the screen
The three signals identify where to research; they do not replace supply-demand and company analysis.
Ignoring invalidation events
A ceasefire, demand reversal, or supply surge can quickly change an otherwise favorable setup.
Is it for you?
Best for
It is best for investors seeking promising sectors or stocks for deeper fundamental research.
Not ideal for
It is not ideal as a stand-alone trading rule when the underlying business is undergoing a structural break.
From the transcript
“what I call a triple crown of quand upward earnings revisions, positive price momentum, cheap evaluation versus history.”
“I think I'm more in the by the dip mode, believing that demand growth will seat supply growth. Sentiment's negative, their cheap upper revisions positive…”
From the episode
Adam Parker on Strategies and Valuations
Adam Parker