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Global All Cap Model

Combines our systematic large cap strategy with our best North American small and medium cap ideas, often concentrated in individual positions and sectors.


Key Features

ALL CAP GLOBAL

Our “go anywhere” approach provides more opportunities.

VALUE APPROACH

Our most important pillar is our value investment philosophy.

RISK MANAGEMENT

We utilize a parallel process to monitor economic and market risk.

Strategy Overview

The Global All Cap Model is generally for clients whose principal objective is long-term capital appreciation.

The Global All Cap Model combines our large cap strategy (i.e., Generation Global Insight) with our best North American small and medium cap ideas, often concentrated in individual positions and sectors. We employ a proprietary and systematic process to uncover large cap global equities which our analysis indicates are undervalued. The most undervalued securities in our global large cap universe form the focus group for our analytical team to concentrate its research efforts for large cap investment targets, typically with market caps over $5 billion at the time of purchase, but may include those in the $2-5 billion range. We seek out small and medium cap stock ideas using myriad sources, including filters and screens, outside research analysts, corporate regulatory filings, newspapers and periodicals, other like-minded investors and our diverse business contacts. Our proprietary TRACTM system is used in an effort to optimize buy and sell decisions for targets and portfolio holdings.

In addition to rigorous stock screening and research, we utilize a parallel process to monitor economic and market risk.

The Global All Cap Model has a notional guideline of a minimum weighting of approximately 60% or more in large cap stocks (allocation in actual client accounts depends on clients’ specific preferences and circumstances). The small/medium cap stocks typically have less liquidity and potentially higher volatility than large cap stocks. Investments will have a North American focus, however may include international securities depending on their relative attractiveness.

Although accounts will be invested primarily in equities, they may hold income securities when we believe the risk-return opportunity compares favourably to equities. Accounts will typically be fully invested, but may hold cash if our outlook dictates such allocation. Short-selling and option strategies may be implemented for clients who authorize them.

Key Details

Inception  
  Long-Only June 1, 2009
  Long/Short April 1, 2009
Investment universe Global all cap
Style Value
Short selling and options For authorized accounts
Management fee 1.25%
Performance fee 20% of appreciation over 6% hurdle rate

Top 10 Holdings

AS OF MAR 31, 2021

HEADWATER EXPLORATION INC
NASPERS LIMITED CL N
WELLS FARGO & CO.
SONY CORP ADR
LIBERTY MEDIA CORP SR C
ORCA ENERGY GROUP CL B
INTEL CORPORATION
LOCKHEED MARTIN CORP.
FACEBOOK INC CL A
MICROSOFT CORP
Global All Cap Model

“Our four pillars are quantitative tools that we have developed to aid and complement the analysis, selection and trading of our investments. These proprietary tools are used in conjunction with our bottom-up fundamental research and overall macro outlook.”

Randall Abramson, CFA
CEO, Portfolio Manager

Global All Cap

Four Pillars

 

1 Value Philosophy

Our most important pillar is our fundamental research and value investment philosophy. We analyze a company’s operations, finances and valuation to assess its risk and reward potential. A value strategy offers two advantages. First, a stock purchased below our estimate of intrinsic or fair market value offers the potential for outperformance as the stock ascends to fair value. Second, we believe that stocks trading below their fair value offer a “margin of safety”; that is, downside risk is mitigated because these stocks are detached from their fair value.

2 Trade Optimization

Our proprietary security trading model, TRACTM, is used to gauge changing sentiment for individual stocks, sectors or overall markets. TRACTM helps to optimize the timing of our stock purchases and sales. We aim to buy stocks when they fall to TRACTM floors and to sell them when they hit ceilings or fall through floors.

3 Market Risk & 4 Economic Risk Management

Our two macro pillars are designed to manage risk. We monitor global economies and markets to alert us to potential economic downturns or severe market declines. Our Economic Composite evaluates economic activity by combining various economic variables into one composite to capture business cycle peaks. The Relative Indicator of Momentum model (TRIMTM) is an algorithm that combines momentum and volatility to determine the primary trend of the market. When the economy hits a business cycle peak according to our Economic Composite or stock markets fall below their TRIMTM line, we may raise cash, alter portfolio holdings, and hedge our portfolios by short selling markets/sectors.

Stock selection process

Process Overview

1 PROPRIETARY SCREENING

The Global All Cap Model employs a proprietary and systematic process to uncover large cap global equities which our analysis indicates are undervalued.

2 DUE DILIGENCE

The most undervalued securities in our global large cap universe form the focus group for our analytical team to concentrate its research efforts for investment targets. 

3 TRADE OPTIMIZATION

Our proprietary TRAC™ system is used in an effort to optimize buy and sell decisions for targets and portfolio holdings.

Screening Ingredients

To find ideas we utilize our proprietary ranking methodology that ranks companies on combined valuation, business quality, financial strength, and momentum metrics.

VALUATION

Stocks are ranked on valuation ratios such as P/E, EV/EBITDA, P/CF, and our own proprietary valuation ratios.

QUALITY

Stocks ranked on performance metrics such as return on equity, return on invested capital, etc.

FINANCIAL STRENGTH

Stocks ranked on debt-to-equity, interest coverage, Piotroski F Score, etc.

MOMENTUM

Stocks ranked on relative performance over the last 12 months.

How We Evaluate a Business

Competitive Advantages

Competitive advantages are critical weapons that keep a company ahead of the competition. Examples of competitive advantages are cost leadership (more for less), differentiation (more for more), scale, network effects, ownership of brands or intellectual property, favorable regulation that creates toll-booth dynamics, operational effectiveness, technological expertise, and financial flexibility. Without these competitive advantages, achieving a high and sustainable return on invested capital is nearly impossible.

Management

We look for strong leadership teams that are aligned with the interests of long-term shareholders. Priorities should be extending competitive advantages, achieving best-in-class operational excellence, and establishing strong capital allocation policies.

We prefer companies run by owner-operators that have cultivated an entrepreneurial mindset across all levels of the organizational structure. Lean and flat structures enable companies to evolve with the operating environment and capture emerging sources of value with new products and services.

Valuation

We value businesses in consideration of their macro environment, leadership, competitive advantages, and risk factors. The future is hard to predict; we strive for conservativism in our assumptions.

Purchasing companies below our estimate of intrinsic or fair market value offers the potential for outperformance as the stock ascends to fair value. We believe stocks trading below their fair value offer a “margin of safety”; that is, downside risk is mitigated because these stocks are detached from their fair value.

Business Model Evolution

History is replete with examples of companies that stood still as the world changed around them. Competitive advantages that serve a company well today will erode over time if management fails to recognize changing consumer preferences or disruptive new technology that could upend the economics of their industry.

We look for management teams that look to the future. Such companies are not afraid to jettison business lines or make large investments to capitalize on opportunities—even at the expense of short term earnings.

Macro Evaluation

We evaluate headwinds and tailwinds to identify threats and opportunities, respectively, that may impede or accelerate growth over the short and long-run. Transitory headwinds such as input costs, irrational competition, wage pressures, etc., may create an opportunity should investors be overly pessimistic about their duration or intensity.

We prefer companies poised to benefit from secular growth drivers such as demographics, technological trends, or geopolitical forces rather than companies in cyclical sectors.

Mispricing and Catalysts

We unravel the prevailing narrative surrounding the company to understand the reasons why the investment opportunity exists. What information or understanding do we have that gives us an edge?

We prefer businesses with clear catalysts that will close the gap between price and our fair value estimate. 

Risk Management

Economic Modelling

We developed an Economic Composite to monitor the business cycle. Monitoring the business cycle is of paramount importance. Since 1965, two-year rolling losses of 20% or more have always been preceded by a business cycle peak. Equity markets tend to be more volatile following business cycle peaks than during periods of economic expansion.

Market Risk Analysis

Market drawdowns can occur outside the natural ebb and flow of the business cycle. The Relative Indicator of Momentum (TRIMTM) is an algorithm we have developed that combines market volatility and momentum to model transition points that forewarn of a potential shift from a bull market to a bear market (a market decline greater than 20%). We use TRIMTM to monitor numerous global markets and commodities.

Portfolio Construction

We may employ short positions, option positions, or other strategies, for risk management, in an effort to reduce volatility, lower drawdowns, moderate correlation to the overall market, or opportunistically to increase returns.

Global All Cap Model

Combines our systematic large cap strategy with our best North American small and medium cap ideas, often concentrated in individual positions and sectors.

Overview

Global Insight Four Pillars

“Our four pillars are quantitative tools that we have developed to aid and complement the analysis, selection and trading of our investments. These proprietary tools are used in conjunction with our bottom-up fundamental research and overall macro outlook.”

Randall Abramson, CFA
CEO, Portfolio Manager

Stock Selection Process

Risk Management