Quantitative & Fundamental Strategies

We have developed a disciplined process that relies on quantitative and fundamental analysis to help us identify what we believe to be the most attractive opportunities.

Quantitative & Fundamental Investment Process

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SCP utilizes a weekly report appraising various quantitative factors that provides a ranked list of companies within each sector. Portfolio Managers use the ranking system to narrow the field of candidates to provide a consistent set of metrics to analyze how the companies rank over time.

Components of Superfactors include, but are not limited to:

Valuation

  • Price to Free Cash Flow
  • Price to Earnings
  • Price to Book
  • Price to Sales

Quality

  • Economic Returns
  • Balance Sheet Strength
  • Capital Deployment & Financing
  • Earnings Quality

Market Reaction

  • Estimate Revisions
  • Relative Strength
  • Stock Price Trend
  • Liquidity

Our investment team conducts fundamental analysis to evaluate each company’s valuation, financial strength and management behaviors. We seek to identify favorable financial strength and management behaviors as measurements of quality.

Valuation

  • Scenario-Based Analysis
  • Margin of Safety
  • Relative and Absolute Valuation

Financial Strength

  • Free Cash Flow
  • Economic Returns
  • Balance Sheet Strength
  • Business Sustainability

Management Behavior

  • Capital Allocation
    • Share Repurchases
    • Dividend Policy
    • M&A Activity
  • Stable Accounting Practices

 

Probability-Weighted Price Targets

  • Guides entry, exit and position sizing
  • Review investment thesis and probability-weighted price targets when material financial information is received

Sell Considerations

  • Deterioration in model rank or company fundamentals
  • Price target
  • A more attractive investment opportunity exists
  • Appearance of multiple Risk Flags
  • Misjudgment

General Guidelines for Portfolio Construction

  • Build concentrated positions in companies, industries, and sectors that are fundamentally and quantitatively attractive
  • Investment with a long-term time horizon
  • We do not constrain the portfolio to any systematic risk factors