Quant Screening Followed by In-Depth Fundamental Analysis
To narrow down our universe of stocks, we start off with various quant screens and factor-based screens to identify potential investments. But quant screening is very limited. It's backwards looking, doesn't adjust well to incorporate forward-looking information, and simply can't adjust for other factors such as management interpretation of loose accounting rules. It's good for generating potential ideas, but all the important work comes afterwards through fundamental forward-looking analysis. By reviewing macroeconomic factors, industry trends and company-specific issues, we assess each firm's forward-looking potential based on its strengths, opportunities, risks and weaknesses. We look for growth and sustainability in adjusted cash flows to support value. While some other research firms incorporate fundamental analysis, it's what we do afterwards that ensures that our interests are completely aligned with yours..
Next Step: Independence Screen