Investment Process

The investment team prioritizes ideas using a matrix of criteria including the strength of the identified catalyst, our informational advantage, and the risk/reward parameters.

Intensive Research and Modeling
The analyst who leads on a specific investment evaluates the company against its competitive landscape and compares it to market valuations using a variety of metrics.  Detailed financial models are prepared to provide a valuation framework including: DCF, LBO, M&A, break-up, and liquidation analysis.  Collectively the team is engaged to scrutinize the investment thesis for further due diligence which include management calls/visits; field research and channel checks; and consultations with industry contacts.  These inputs allow us to ascertain a range of possible enterprise values.  Specific attention is focused on downside risk.

Position Structuring
We examine securities across the entire capital structure to identify the best risk/reward tradeoff.  We size positions based on our conviction in the investment thesis and the magnitude of potential tail risk.  A significant premium is required for positions with less liquidity.

Portfolio Construction
Our portfolio typically consists of 30-45 long and short idiosyncratic investments which may include multiple securities.  Individual investments are continually monitored with regard to specific catalysts/milestones to track the accuracy of our initial thesis.  Additionally we ensure a liquidity profile of the broader portfolio and limit exposure to highly illiquid positions.

Portfolio Risk Management
We employ a parallel process at both the position and portfolio level to balance a bottom-up centric strategy with a top down assessment of overall risk.  The process is intended to concentrate the portfolio on idiosyncratic risk and mitigate unintended beta or sector exposure drifts.