Fundamental research is the basis for our investment process and each of our two primary investment strategies:
We believe that outperformance comes from good stock selection. For us, that starts with targeting approximately 1,000 company meetings annually to collect individual data points from many industries and sectors, which we weave into themes that we believe will provide a catalyst for revenue and earnings growth.
We identify all companies that might benefit from each theme within that industry and/or across market sectors, including competitors and supply chain participants, seeking opportunities to leverage a particular theme.
We perform in-depth fundamental research on each thematic target company, including discussions with management and stress testing financial statements.
Once a company has cleared the fundamental hurdle, we focus on valuation using a process we call “triangulation”. A company’s stock value is a moving target, so we use three valuation methodologies including earnings, industry and cash flow metrics to reach a price target that is reviewed and updated each day for new information. To the extent that the price target provides at least 35% upside the stock is considered for inclusion in the portfolio.
In order to ensure that portfolio companies maintain their attractiveness, we use a strict sell discipline, including two components that allow us to stop problem stocks early.