UNIQUE PROPRIETARY VALUATION SYSTEM
Quickly and accurately analyzing over 1,500 names that meet our turnover and coverage criteria was the most difficult part of our process. We fully believe in the stringent process and measures that all other investment managers employ when looking at companies, and we wanted to ensure that we follow these no matter which country or sector the stock was in without giving misleading information. We also had to ensure that the process was able to work for both long and short investment ideas. In other words, one valuation measure that could look at historic, current and future data and provide us a cornerstone to work with as well as providing us with a price target for each stock.
We had to invent a new way of valuing a stock. Some managers, whether they be traditional or quant, place greater emphasis on one piece of data than another, while others employ a box ticking exercise. We did not want to do this. We built a formula which gets various pieces of a balance sheet to interact with one another in such a way that it captures both value and growth while at the same time spotting pricing anomalies across each market and sector whilst taking into account different accounting standards using freely available consensus data. The mathematical formula we created is run everyday, across all stocks by dragging the data in direct from Bloomberg via Excel. This has not changed since inception in February 2008. All that is needed to run our investment process is a PC with Excel and Bloomberg on it.
We had to invent a new way of valuing a stock. Some managers, whether they be traditional or quant, place greater emphasis on one piece of data than another, while others employ a box ticking exercise. We did not want to do this. We built a formula which gets various pieces of a balance sheet to interact with one another in such a way that it captures both value and growth while at the same time spotting pricing anomalies across each market and sector whilst taking into account different accounting standards using freely available consensus data. The mathematical formula we created is run everyday, across all stocks by dragging the data in direct from Bloomberg via Excel. This has not changed since inception in February 2008. All that is needed to run our investment process is a PC with Excel and Bloomberg on it.
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For a Long position we are looking for a value below 1.00
We then look to see if the stock meets our requirements for Growth, Yield and upside to our Price Target after checking that the consensus data is valid |
Unique Proprietary Valuation System
A series of 16 elements from a company’s balance sheet and accounts are blended together in a complex mathematical equation that produces both a fair value as well as a price target for that company |
For a Short position we are looking for a value above 1.50
We then look to see if the stock meets our requirements for Growth and downside to our Price Target after checking that the consensus data is valid |
This process is run every day for our whole universe, including positions that are currently in the portfolio. Because of the nature of the formula, we have never been in a situation where the number of investment ideas it proposes has breached our risk controls. The average number of positions since inception has been 24 for combined Longs and Shorts with the average Gross position being 81.96% and the average Net position being +51.20% since inception in February 2008. Breaking it down further, the average number of trades per day since inception has been 0.68 trades.