From Stock Market Maestros: The winning habits, strategies, and mindsets of the world’s best investors, to be published by Harriman House in March 2026 (Pre-order now).
By Clare Flynn Levy
Clare Flynn Levy is CEO & Founder of Essentia Analytics. Prior to setting up Essentia, she spent ten years as a fund manager, in both active equity (running over $1B of pension funds for Deutsche Asset Management), and hedge (as founder and CIO of Avocet Capital Management, a specialist tech fund manager).
As you may already be well aware, the reality of investing is that most portfolio managers get things wrong more often than they get them right. But success doesn’t depend on being right all the time; it depends on what you do when you’re right and how you handle it when you’re not.
In Stock Market Maestros, we profile twelve investors who don’t just pick good stocks, they also know how to run their winners and cut their losers before they spiral out of control. Pre-order now.
In Stock Market Maestros, the upcoming book I co-wrote with bestselling author Lee Freeman-Shor, we identify the rare investors who have mastered that balance – those who not only regularly pick stocks that beat the index, but who make great sizing and timing decisions, as well; investors who know how to run their winners and cut their losers before they spiral out of control. We know that because we’ve analyzed their trade data.
Sports analytics, for investors
I didn’t set out to analyse fund managers for a living. Once upon a time, I was a professional fund manager myself. But after a decade managing money, it became clear to me that although I was being paid for recent performance, that recent performance wasn’t actually a useful measure of my skill as an investor – it was a measure of outcome. It told me nothing about what I could be doing differently to get an even better result in the future.
That realisation led me to a question I couldn’t shake: What if I could see my own decision-making patterns, clearly and objectively? I wanted the same kind of feedback an athlete gets – a way to know exactly what I was doing that was consistently adding value and what I was doing that was quietly sabotaging my performance. That way, I could focus my energy on doing more of what I was good at and less of what I wasn’t.
Fast forward, and that question became the foundation of Essentia Analytics, the company I started in 2013 to provide portfolio managers with what’s called decision attribution analysis. We use data to show investors – and the allocators of capital to them – exactly how their decisions stack up, where they excel, and where they can improve. Think of it as sports analytics, for professional investors.
What qualifies a Maestro?
The 12 Stock Market Maestros we profile in the book didn’t come to us by chance or indeed by favour – they came from objective analysis of their decision-making skill. Not just stock-picking skill, but sizing and timing skill, as well.
We started with a universe of tens of thousands of public equity mutual funds and active ETFs, and narrowed it down to a short list comprised of:
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- Morningstar, Lipper, FEFund Info and Morningstar award winners.
- Equity mutual funds listed on Morningstar with high three-year Sharpe, Sortino and Upside/Downside Capture Ratios.
- Funds already in the Essentia Analytics database exhibiting strong decision stats.
Seventy-three funds made that short list. On those 73, Essentia Analytics conducted very detailed analyses of historical daily holdings data going back up to 15 years, using the Behavioral Alpha® Benchmark methodology.
You can read about it in The Journal of Investing, but to summarise, the Behavioral Alpha Benchmark methodology measures the skill exhibited by the investor in each of seven critical decision types:
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- Picking
- Sizing
- Entry timing
- Scaling in
- Size adjusting
- Scaling out
- Exit timing
In each case, we look at whether an investor’s decisions produce a better relative P&L outcome than would have been achieved by chance. After all, if the decisions the investor is making aren’t producing better outcomes than would be achieved by chance, the money is better off invested in an index fund, for low fees – and the fund manager is better off finding a more productive use of their intellect and energy.
Key Takeaways
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- The 12 Stock Market Maestros we feature in the book were selected from a short list of 73 high performing/award winning funds, on the basis of both short term and long term measures, namely the Behavioral Alpha Score, hit rate and payoff ratio.
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- Behavioral Alpha Score looks at the individual decisions made by the investor, to answer the question: “Over the last 3 years, has this investor actually demonstrating skill in decision-making, when compared with what would have been achieved by chance (or the equivalent index fund)?” Investors with Behavioral Alpha Scores over 50 can make that claim, whereas those with scores below 50 cannot. And investors with BA Scores over 50 are 1.5x as likely to outperform in future as those without.
- Hit rate (also commonly referred to as “batting average”) measures how often an investor’s ideas (or decisions) result in positive relative performance. A hit rate of 50% means they’re right as often as they’re wrong – no better than chance. But here’s the kicker: being right more than half the time isn’t enough to guarantee success.
- Payoff ratio is what separates the best executors from the rest. It measures how much a manager gains when they’re right compared to how much they lose when they’re wrong. A payoff ratio over 100% means their winning ideas (or decisions) more than make up for their losers, and is typically the result of a disciplined approach to running winners and cutting losses.
- Neither the Maestros nor the short list had a median hit rate > 50%, but the managers we crowned Maestros scored significantly higher than the rest of the short list on all three measures, most notably on Behavioral Alpha Score and payoff ratio.
Stock Market Maestros: The winning habits, strategies, and mindsets of the world’s best investors is published by Harriman House and goes on sale in March 2026. Reserve your copy now!
About Essentia Analytics
Essentia Analytics is the leading provider of behavioral data analytics services to professional investors and allocators of capital. Led by a team of experts in investment management, technology and behavioral science, Essentia combines next-generation decision attribution analytics technology with human coaching to help both equity fund managers and allocators identify investment skill and bias — and capture performance that was previously being lost to decision-making deficiencies.
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