Focused Investment Approach - International

Golden Capital Mangaement offers three actively managed international strateies that take long positions in companies that are undervalued relative to their fundamentals and exhibit the likelihood to meet or exceed earnings expectations. These companies are listed on exchanges in developed and emerging markets around the world.

Philosophy
At GCM, we believe pricing inefficiencies exist in the market, and company fundamentals drive stock prices in the long term. By applying an objective, rules-based investment approach we believe we can exploit market biases and inefficiencies to generate excess returns. We also believe that through our technological expertise we can implement a diversified portfolio accounting for both alpha and risk characteristics. Our goal is to generate alpha primarily via stock selection. We believe that quantitative modeling techniques can help identify pricing inefficiencies and can facilitate a systematic and repeatable investment process.

Investment Research
The firm’s Alpha Model is rooted in fundamental research, and our quantitative analysis provides a systematic method to apply this research. The model is dynamic in nature and draws from a proprietary library of both universe and sector-specific factors. Our factors examine characteristics such as:

  • relative value
  • earnings fundamentals
  • sentimentmanagement signals
  • intermediate price movements
On a quarterly basis the portfolio managers evaluate the factor library using various measures of historical factor effectiveness and stability in order to determine which factors provide the best forward looking alpha signal. Dynamic factor rotation occurs when factors with low predicted payoff are removed from the model and replaced with factors showing the most positive near-term forecast. As a result, the Alpha Model is a unique grouping of universe and sector-specific factors that may change on a quarterly basis. Typically, the Alpha Model contains 5 to 9 universe factors combined with the 5 to 9 factors that are most favorable for each GICS sector.

Each stock in the investment universe receives a ranking of 1 (most attractive) to 5 (least attractive), providing a comprehensive view of its relative value, operational and financial performance, and stock price behavior.

Portfolio Construction
Portfolio managers employ rigid portfolio construction guidelines for both buy and sell candidates. Buy candidates are typically chosen from the top 20% of the Alpha Model and are subject to a secondary qualitative review. This review screens for stale or invalid data based on the distribution of new information, and includes an examination of any company-specific circumstances. Portfolio managers analyze candidates with the highest Alpha Model rankings, taking into account country, region and sector risk exposure. Further analysis evaluates the contribution each new position has to portfolio beta, oil sensitivity, style and size characteristics.

The sell discipline is based on declining Alpha Model rankings. Companies that rank lowest in the model become candidates for sale. Secondary factors that weigh in the sell decision are controls on annual turnover and the maintenance of proper diversification and risk characteristics. Following a qualitative review to validate the model’s rankings, the candidate may be trimmed or sold completely from the portfolio.