Strategy
As discussed in our philosophy, we use a distinctive (and we feel, more evolved) strategy that focuses on a stock's market price-implied expectations.
The portfolio manager builds a discounted cash flow (DCF) valuation model, but not the typical way. Rather than estimating the various inputs and blindly accepting the output as the one true intrinsic value, we let the market reveal the inputs. The current share price encapsulates the market's expectations for the stock's key drivers.
Using that information, plus our detailed understanding of the business, we determine what the plausible bullish and bearish scenarios are for the primary metrics. We also estimate the probabilities for each situation.
The model shows how far we can expect the share price to move, should the market's expectations be revised. If the market is offering attractive odds, we take the appropriate long or short position.