Equity Market Neutral Investing, Part IV: Our Process

The equity market neutral strategy is a natural extension of the American Century Investments® value team’s existing capabilities—we have been managing value portfolios since 1993, with extensive experience as stock pickers. The team identifies and pairs highly correlated business models—going long the more undervalued company and short the overvalued company.

Using the “Buddy” System

In our research, we look for two similar companies from the same industry—for example, two major wireless telecommunications companies—and hold the stocks in different ways. The team seeks to “go long” the more undervalued company (buy in anticipation of an increase in value) and “short” the overvalued company (sell to capitalize on falling prices). Unique in the market neutral space, we believe that a fundamental approach (on both the long and short positions) leads to more consistent returns over time.

The opinions expressed are those of our investment professionals, and are no guarantee of the future performance of any American Century Investments® portfolio. This information is not intended to serve as investment advice; it is for educational purposes only.