EDMOND — Sitting on the deck of a cruise ship in Hawaii with his laptop computer while his wife went jogging around the boat, US Fleet Tracking CEO Jerry Hunter wrote a computer algorithm to help manage his investments.
While looking out at the Pacific Ocean, Hunter modeled his algorithm based on the momentum of waves.
The algorithm chooses which stocks to invest in based on price volatility and makes split-second predictions whether a stock's value will go up or down.
“It watches the stock price tick by tick, trade by trade, second by second and analyzes the ups and downs and trends,” Hunter said. “It spots those trends and determines unemotionally when to get in and when to get out. It turns out it's pretty good at predicting what will happen.”
Hunter founded US Fleet Tracking with his wife, Cindy, in 2005. The company provides vehicle tracking services to companies in more than 120 countries.
Hunter was one of financial adviser Mike McGuire's biggest clients.
“He would call me from the ship and tell me what he was doing,” McGuire said. “When he got back to the States, he showed me what he had done for himself, and I said, ‘Hey, this is something we should really allow other people to participate in.'”
The computer programmer was so pleased with yield from his investments that he has teamed with McGuire to form Hunter McGuire Capital Management. Hunter can't talk publicly about the rate of return he has made on trading the algorithm's stock picks, for fear of running afoul of the U.S. Securities and Exchange Commission.
Housed in an office at US Fleet Tracking's Edmond headquarters, the firm is offering financial advisory services and also plans to launch a hedge fund later this year based on Hunter's trading algorithm.
“This could easily rival Berkshire Hathaway,” McGuire said.
The hedge fund works using the concept of momentum-based algorithmic trading.
“This is black box trading with a computer,” McGuire said. “It takes the emotion out of your decisions and bases everything on mathematical programs.”
The algorithm makes rapid trades based on predictions whether a stock price will rise or fall.
“We're not staying in a stock for six months,” Hunter said. “We're staying in there for a few hours and waiting for it to make the turn and then we're getting back out.”
The hedge fund will only be open by invitation to wealthy individuals with a net worth of $1 million or more — not including the value of an investor's home.
Hunter and McGuire will collect a percentage of the profits from the hedge fund as management fees. They have retained Ernst & Young to monitor accounting and compliance for their company.
Hunter said that while his algorithm may appear complicated, it's actually pretty simple. As a computer programmer, Hunter is trained to look at data and analyze it.
“I'm just a computer programmer — a math guy,” Hunter said. “Everything is usually simpler that it appears. You write a series of instructions. It's all based on logic.”