Independent Investment Ideas Don’t Come Easy

Posted by Dana Funds Investment Team on Apr 15, 2021 3:45:59 PM

Risk controls … sell discipline … trading practices … investment policies. They are all an important part of the investment process that can, hopefully, distinguish an investment strategy.

But there’s another factor we believe is just as important (probably more so) in differentiating an investment manager: Idea generation. It’s what starts an analyst or portfolio manager on a path that creates a strategy that doesn’t replicate everyone else, and provides the client something truly distinctive.

Despite its importance, we get less questions about how we come up with investment ideas. We believe it’s a unique funnel, that tunes out noise and takes us beyond the road shows most portfolio managers attend. In a Q&A, we explained how we believe our process is different:

Q: What are some ways your investment process might differ from other active managers?

“Our idea generation is entirely independent. We don’t get them from road shows, industry conferences or sell-side calls. While our stock selection process is ultimately qualitative, we blend that with a unique quantitative process that helps us sift through the entire stock universe and ensures there’s not a company with attractive characteristics we might have missed on our own.

Our quantitative screens rank the respective universe for a given strategy based on three factors: a relative valuation model, a value relative to growth screen and an estimate revisions model. A key tenet of our investment philosophy is that we don’t want to overpay for growth. The first two screens help us identify attractively valued growth companies. The estimate revisions model helps us avoid value traps and helps isolate the companies within a sector or industry that have positive or buoyant earnings characteristics. Used in tandem, these screens are an efficiency tool for our analysts that also open them to a host of undiscovered ideas.”

To get the entire story on how we seek to add value for our clients, we invite you to read the short Q&A, available below.

Download the Q&A with Dana's Portfolio Managers

 

The Dana Funds are distributed by Ultimus Fund Distributors, LLC. There is no affiliation between Ultimus Fund Distributors, LLC. and the firms referenced in this blog post.