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Applied Finance has a disciplined approach to stock selection and company replacements in our strategies. Our objective is to remove analyst bias while taking advantage of their expertise once a company has met our criteria.

Buy Discipline: 5 step process

Idea generation: Baseline valuation screen for top 30% undervalued stocks within each sector

Qualification Analysis: Company Track record, Model accuracy, does company meet criteria?

In-Depth Analysis: Valuation sensitivity analysis, detailed model calibration

Decision Deliberations: Catalysts, Diversification/Concentration analysis, Risk analysis

Committee Decision: Analyst presents ideas and supporting research for committee vote. Super majority needed.

Sell Discipline: 5 Step Process

Typically, companies that are considered for replacement have met their intrinsic value and offer little upside, the fundamentals of a company have deteriorated, or there is less confidence in the original assessment of a company which prompts reevaluation of the position.

Sell Flag: Baseline valuation screen for existing holdings in bottom 50% of sector.

Sell Alert: Look for companies with negative valuation upside or high embedded expectations.

Compare/Contrast with Replacement Ideas: Valuation and fundamental strength comparison as well as how the trade would affect the risk/exposure for each sector and the portfolio as a whole.

Decision Deliberation: Absolute and Relative Valuation assessment, correlation/concentration analysis with existing names.

Committee Decision: Analyst presents Sell thesis and models to committee for vote. Super majority approval is needed for any action.

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