Investment Philosophy and Process

INVEST IN GOOD COMPANIES WHEN THEY ARE ABOUT TO BECOME GOOD STOCKS

  • Buy businesses at reasonable valuations
  • Buy businesses that create value for shareholders
  • Take advantage of price inefficiencies resulting from irrational behavior
  • Use sophisticated mathematical tools to identify inefficiencies
  • Investment debate by experienced professionals
  • Consistent, objective analysis
  • Strict portfolio discipline

 

One Assumption

Good companies that become good stocks are best identified using specialized analytics that minimize the use of all but one assumption to first identify when the current stock price is below the level at which the stock market has historically valued similar fundamentals.  Combined with unique, non-linear mathematics to analyze stock price and volume movement, we identify points of inflection in the movement of the stock.  Investments are made in stocks at points of lower risk and when it is likely that the stock market will recognize the true value of the company within a reasonable amount of time.

Our only assumption is that, over time, the stock market will value the current fundamentals of a company as it has valued them in the past.

Valuation Models

Over the long term, fundamental measures of value are the best gauge of a company's worth. Like most investors, Marque Millennium uses measures such as price to book, price to sales, price to cash flow, and price to earnings to determine value. Unlike other investors, however, Marque Millennium uses a proprietary technology that simultaneously weights fundamental measures while correcting for the type of industry represented. Our neural network system analyzes and evaluates the relationship between price and fundamentals, and then places it in the context of the industry sector. Each month, new fundamental data are fed into the models to determine a fair market price for each stock in our large-cap universe. Each week, the top decile of undervalued securities are selected for additional study.

Stock Price Analysis

The recent behavior of stock price itself, and the perception of value, continually influence an investor’s willingness to buy and sell, which in turn produces significant price swings. This realm of financial analysis is called Behavioral Finance, and its effects are measured using tools that gauge the recent memory of market action and crowd response. Marque Millennium has pioneered advanced behavioral finance tools using the principles of chaos theory. The goal of these tools is to determine when price action deviates from the norm, and then to determine if it represents an investment opportunity. Each week we scan the stocks in our universe to identify situations in which the emotion of the crowd has led to an irrational security price and thus a potential buying or selling opportunity.

Qualitative Evaluation

Our models do not 'know about' current events.  Recent activities from anywhere in the world may have influence on U.S. stock price action.  Therefore, we add a layer of qualitative evaluation to the quantitative work of the previous two steps that may impact on candidate stocks prior to taking any actions.  

Investment Committee Decision

The final step in our process is review of quantitative signals and qualitative considerations by the Investment Committee for execution of purchase.