The first step is a cross-asset class research of the fundamental underpinnings of the macroeconomics of a sector and bottom up the health of a company’s balance sheet. Our leading indicators for a company’s success are a quarter over quarter increases in free cash flow, sales growth, and momentum in a company’s Price-to-Earnings ratio. For all of our high conviction positions we do a thorough analysis of the company’s return on investment. But, ultimately we look at how that return is reflected in benefits to the shareholders either in the form of buybacks, dividends, or growth. We are not biased to a particular method of return of capital, but find that dividends and buybacks have been a more predictable leading indicator.

In the analysis phase we look to reconcile our own findings from the research phase, with the broader momentum metrics to determine a “base case” for investing in the market and our short list of conviction plays. Here we determine what an efficient model will look like for broad, sector driven exposure to markets. The base case and the conviction plays are then submitted to the investment committee for asset selection and introduction to our investment oversight.

The investment committee is responsible for the final selection of assets that both the base case holdings are composed of, and which of the conviction plays make the final cut. It is here that deliberation and decision making process forms our research into action. We consult with Chartered Financial Analysts to confirm our findings and remove as much bias in the research and analysis phases as possible.

Once the base case and conviction plays are agreed upon they enter an oversight phase to confirm quarterly that the health of the underlying trends and cash flow is stable or improving. This is also the phase where we determine the right balance of risk to divide the base case into three risk categories, and the convictions that will accompany those risk centric portfolios.