Our research seeks to identify stocks currently trading at prices substantially below their intrinsic value. Our proprietary database, combined with information from third parties enables us to continually monitor markets as well as identify and evaluate possible opportunities and current holdings in an efficient, highly disciplined manner. We maintain a broad, focus, and buy list.
Our broad list is a dynamic database that contains information on about 5,600 companies. It merges historical operating data with daily stock price and trading volume trends.
Our focus list consists primarily of companies in fundamentally attractive businesses that are capable of generating superior sales and earnings growth. We also look for undervalued, generally well-run companies with temporary problems that management appears to be addressing effectively and for which a "turnaround" can reasonably be expected. GPM invests in small, mid and large-cap companies. We look for a fundamental change or "catalyst" that can lead to an increase in the level of attention given to a stock.
Our buy list is comprised of potential core holdings in predictable businesses that can be acquired broadly, in all of our stock and balanced accounts. Ideally, these positions will be reasonably liquid. Acquisition candidates will normally meet most of the following criteria:
Strong balance sheet with undervalued assets and/or hidden value
Predictable growth in revenue, earnings and cash flow
Relatively inexpensive based on price/sales and price/estimated earnings
Undervalued on the basis of price/net cash flow
Manageable capital expenditures, acquisition plans and future capital needs
The underlying business value is at least 50% greater than the current share price and growing. We quantify the short and long term growth prospects relative to peer group companies and estimate the value of the entire business on a per share basis. Our analysis should provide reason to expect this "Valuation Gap", to be filled within two years through stock price appreciation.
Large "Insider" stock ownership by management, directors and others close to the company, with special consideration given to their recent trading activity
We develop a clear understanding of a company and its business fundamentals and unique operational risks. We look for undervalued or understated assets and/or contingent liabilities and consider debt levels, interest cost and maturity schedules as well as opportunities to reduce interest expense. We also consider the relative attractiveness and availability of convertible bonds if any are outstanding.
The same fundamental valuation approach is used in determining when to sell a stock that becomes relatively expensive.
revised 12/06