PROCESS
The investment process consists of quantitative and qualitative measures to
evaluate prospective and existing holdings. Using a proprietary research model,
Great Oak screens the U.S. equity universe weekly for companies that meet the
following criteria:
- Market cap between $50 million and $5 billion
- Low price-to-earnings, price-to-cash flow and price-to-book ratios
- Low debt
- Strong and stable balance sheets
The criteria listed above typically result in a research list of 300-400
companies. The research list is supplemented by other information generated from
industry contacts, media and other sources. Great Oak then conducts thorough
fundamental research on prospective companies to determine whether the
statistically undervalued companies that appear on the list are worthwhile
investments. Fundamental research generally consists of rigorous financial
statement analysis, review of SEC filings (10-K’s, 10-Q’s, Proxy Statements,
etc.) and industry analysis. Additionally, we meet with
company management, either on-site, via telephone or at conferences, to better
understand the company’s strategy for improving or growing the business and to
evaluate management’s ability to execute its stated strategy. We
also talk with company competitors, suppliers and other industry contacts to
fully assess the risks associated with investing in the company’s shares.
In order to be considered for purchase, prospective investments must offer
significant appreciation potential over the estimated holding period of two to
four years.
As a value-oriented manager, we evaluate companies that typically have had some difficulty in recent periods, due to the
cyclicality of their underlying businesses, poor execution, competition or other
factors. Such companies are often oversold by short-sighted investors. Great Oak
looks for fundamental changes in the business that we believe the market is not
valuing properly. Catalysts might include new product launches, management
changes, spin-offs, acquisitions or other significant investments. Great Oak
believes that fundamental analysis will uncover high quality, sustainable
businesses or businesses with assets that are significantly undervalued.
