_edited_p.png)
Our mission is to improve client portfolios by delivering uncorrelated, absolute returns
Our story
Coda Partners is an independent, employee-owned investment firm managing global long/short equity strategies. We partner with sophisticated institutions, family offices, and private investors who value idiosyncratic, absolute returns — and share our commitment to differentiated thinking.
We are focused on building a best-in-class organization that fosters critical, independent thinking, intellectual curiosity, and a deep passion for capital markets and investing.
“Coda” means tail in Italian, and it’s our DNA: we hunt for trades where the right tail is longer than the left—created through rigorous analysis, dynamic positioning, and the way we structure the trade.
Moneyball
Most fund managers try to outperform the market. The challenge, of course, is that neither managers nor investors can know future results. So how should an investor—who cannot predict which funds will perform best—actually build a portfolio?
Many investors focus on forecasting returns, attempting to select the funds with the highest expected risk-adjusted performance.
Professional sports teams discovered long ago that success isn’t about picking the players with the best individual statistics — it’s about assembling the right combination of players that leads to more wins.
The same principle applies to investing. The risk-adjusted return from a portfolio of funds is driven by a combination of return, volatility, and correlation of the individual return streams.
​
Of the three drivers, correlation is most overlooked.
Just as successful sports team prioritize balance and complementarity, investors should focus on building a portfolio of different return streams – not chasing yesterday’s top performer (best individual statistics).
​
At Coda we strive to generate idiosyncratic, uncorrelated return streams that add real value to our clients’ portfolios.
Hunting profit margins
We are hunting for tomorrow’s profit margins in the global supply chain. Our specialty is cyclical industries.
We map the fifty most cyclical industries across the supply chain, from energy as the most upstream input all the way to consumer discretionary as the most downstream endpoint.
Macro shocks do not hit the economy uniformly. Higher energy costs, tighter interest rates, monetary debasement, currency swings, wage pressures, and policy shifts all propagate unevenly through the chain. As they move, they compress margins in some segments and expand them in others, depending on where pricing power resides at any moment.
This turns cyclical investing from a vague exercise in predicting “the economy” into a focused effort to anticipate where profits will accumulate next — and where they are about to dissipate.
Investing in cyclicals through our supply chain approach is more than just a sector preference. It is a repeatable investment system for converting volatility, sequencing, and margin migration into durable alpha.
Any investor who buys or sells a security and expects an excess return, should have an idea about who is on the other side of the trade. The edge from focusing on cyclicals comes from four categories:
Human Behavior: investors systematically extrapolate cyclical peak margins as permanent and through margins as terminal
​
Information: cyclicals have many leading indicators—lead times, inventories, rates, cancellations, capex, utilization—that are not integrated in consensus models fast enough
​
Analytical Discipline: we reverse-engineer stock prices using DCF models to estimate market expectations for the cycle ahead – enabling us to spot situations where we have a variant perception
​​
Structural Forces: Many long-only investors are benchmark-constrained and volatility-averse. Cyclicals are career-risk assets, so institutions underweight them by default.
​
Our supply-chain framing improves this structural advantage because it naturally yields relative trades—long one link, short another—rather than a blunt directional bet on the whole cyclical sector.
The capital cycle
The capital cycle is the true engine of cyclicality.
When demand improves, utilization rises, pricing firms, and margins expand. Capital looks cheap and opportunity abundant, prompting companies to invest.
But capacity arrives with a lag—often just as conditions begin to cool. New supply intensifies competition, prices soften, and profits mean-revert.
As profitability falls, capital becomes scarce. Companies cut capex, high-cost producers shut down, and weaker competitors restructure. Supply contracts, markets tighten, and pricing power returns. The cycle resets.
We use the capital cycle as our primary research framework. Because the effect of today’s capital expenditure on future profitability is more predictable than future demand, it provides a durable forecasting edge. Unlike an informational advantage—always competed away—the capital cycle is rooted in human psychology and is likely to persist indefinitely.
Why now?
While cyclical industries will remain cyclical and supply-chain shocks will persist, we believe the opportunity set for our strategy is especially attractive today. Secular forces—rising Asian middle-class consumption, artificial intelligence, electrification, nearshoring, and the energy transition—are reigniting demand for energy, materials, tools, and machinery.
After a decade of capital misallocation, many upstream industries are now capacity constrained. Higher incentive prices are needed to unlock new investment, and rising costs will continue to push through supply chains. Only businesses with real pricing power will be able to protect margins.
At the same time, a large share of global market capitalization sits in downstream industries facing structural margin pressure, which may weigh on broader equity returns. The clearest opportunity therefore lies within the value chain itself: go long the segments with expanding margins and short those where margins are set to contract.