Investment Management
Disciplined Investing
Our equity philosophy looks to provide attractive long-term returns while protecting your money when the market goes down. We look to identify undervalued, high-quality companies that have consistently growing businesses, pay dividends, and have strong balance sheets.
- Contrarian – Being a Growth at A Reasonable Price manager means we are contrarian. We often see value where the market and other investment managers don’t. Our process does not lead us to crowd-followed, popular investment styles based on macro investing, market trends, timing, or themes.
- Disciplined – Our investment discipline focuses on owning businesses that simultaneously demonstrate growth and value. We base security selection on quantitative and qualitative methods to construct efficient portfolios.
- Diversified – We diversify portfolios by sector and industry. No individual stock makes up more than 5% of a portfolio This helps ensure proper risk management by not being overexposed to one sector or company.
- Long-Term – Our focus is on achieving long-term growth while avoiding short-term volatility. We help educate investors to focus on long-term investment goals rather than short-term market noise.
- Sustainable – We buy stocks of businesses that have historically and consistently demonstrated sustainable results over the long term—and that we anticipate should remain so in the future.
Disciplined Investing
Our equity philosophy looks to provide attractive long-term returns while protecting your money when the market goes down. We look to identify undervalued, high-quality companies that have consistently growing businesses, pay dividends, and have strong balance sheets.
Contrarian
Being a Growth at A Reasonable Price manager means we are contrarian. We often see value where the market and other investment managers don’t. Our process does not lead us to crowd-followed, popular investment styles based on macro investing, market trends, timing, or themes.
Disciplined
Our investment discipline focuses on owning businesses that simultaneously demonstrate growth and value. We base security selection on quantitative and qualitative methods to construct efficient portfolios.
Diversified
We diversify portfolios by sector and industry. No individual stock makes up more than 5% of a portfolio This helps ensure proper risk management by not being overexposed to one sector or company.
Long-Term
Our focus is on achieving long-term growth while avoiding short-term volatility. We help educate investors to focus on long-term investment goals rather than short-term market noise.
Sustainable
We buy stocks of businesses that have historically and consistently demonstrated sustainable results over the long term—and that we anticipate should remain so in the future.
Repeatable Process
At the center of our research is a repeatable pattern that guides investment decisions. We typically monitor about 300 businesses, from which the final diversified portfolio may own 65 to 70. All securities—including large, mid, and small-cap stocks—must pass a process based on growth, valuation, and profitability screens
Growth
We use quantitative growth screens to identify and compare companies with attractive growth characteristics simultaneous with cheaper valuation. We focus on businesses with sales and earnings growth, high operating income, earnings per share, and dividend growth.
Valuation
Price to earnings is an important factor in determining how much to pay for a given dollar of earnings. Our quantitative screens identify companies with cheaper valuations to their earnings, peers, and a stock’s trading history.
Profitability
We look at a business’s financial leverage, cash flow, and return on equity metrics. We look for diamonds in the rough—businesses with undiscovered growth elements or cheaper valuations. This often translates to under-loved and overlooked stocks.
Risk control is how Aurora differentiates from competitors. It’s baked into our GARP discipline.
Portfolio Construction
We have a three-step investment process in actively building equity portfolios, honed over 25+ years of investment management experience. All stocks must have traits consistent with our Growth at A Reasonable Price philosophy simultaneous with cheap valuation. We build portfolios based on the objectives in the Investment Policy Statement. Factors typically include risk tolerance, time horizon, tax considerations, and outside holdings.
How We Build Portfolios
Quantitative
Analysis
1
Qualitative
Analysis
2
Portfolio
Construction
3
1
Quantitative Assessment
These computer-generated filters keep only the best 250-300 stocks.
- These traits include a good balance sheet with low debt, a consistent income statement, and a high earnings growth rate.
- We run 12 screens with different definitions of growth and value.
- We analyze company 10K and 10Q footnotes for potential hidden information and inconsistencies.
- We also review outside data research and competitor reports from Bloomberg, EDGAR, Multex, CFRA Research, and others.
2
Qualitative Assessment
This gets us to the best vetted and sustainable 75-100 stocks.
- Businesses must have a high earnings quality, an understandable, forward-looking business model, and consistent management with a proven track record.
- Typically, this fundamental analysis is exclusionary in nature. We’ll look for reasons not to own a company.
- We are agnostic about the sectors, industries, or businesses the companies we buy are in.
- The goal of our qualitative effort is to gain confidence that the stocks we’ve identified as attractive are likely to have sustainable results for the next 1-3 years.
3
Portfolio Construction
The final portfolio gets us to an optimal 50-75 stocks.
- We seek companies with a sustainable business model and 25-years or more of operating history, with strong financial and qualitative characteristics.
- We look to equal-weight our companies. No company gets above 5% of the composite portfolio.
- The businesses we own are an eclectic group of stocks; they are typically solid businesses but not necessarily well-known names.
Portfolio Construction
We have a three-step investment process in actively building equity portfolios, honed over 25+ years of investment management experience. All stocks must have traits consistent with our Growth at A Reasonable Price philosophy simultaneous with cheap valuation. We build portfolios based on the objectives in the Investment Policy Statement. Factors typically include risk tolerance, time horizon, tax considerations, and outside holdings.
How We Build Portfolios
1. Quantitative Assessment
These computer-generated filters keep only the best 250-300 stocks.
- These traits include a good balance sheet with low debt, a consistent income statement, and a high earnings growth rate.
- We run 12 screens with different definitions of growth and value.
- We analyze company 10K and 10Q footnotes for potential hidden information and inconsistencies.
- We also review outside data research and competitor reports from Bloomberg, EDGAR, Multex, CFRA Research, and others.
2. Qualitative Assessment
This gets us to the best vetted and sustainable 75-100 stocks.
- Businesses must have a high earnings quality, an understandable, forward-looking business model, and consistent management with a proven track record.
- Typically, this fundamental analysis is exclusionary in nature. We’ll look for reasons not to own a company.
- We are agnostic about the sectors, industries, or businesses the companies we buy are in.
- The goal of our qualitative effort is to gain confidence that the stocks we’ve identified as attractive are likely to have sustainable results for the next 1-3 years.
3. Portfolio Construction
The final portfolio gets us to an optimal 50-75 stocks.
- We seek companies with a sustainable business model and 25-years or more of operating history, with strong financial and qualitative characteristics.
- We look to equal-weight our companies. No company gets above 5% of the composite portfolio.
- The businesses we own are an eclectic group of stocks; they are typically solid businesses but not necessarily well-known names.
Sell Discipline
We think it’s important to be disciplined when it’s time to sell a security as when to buy securities in your portfolio. Our sell decisions are based on two quantitative factors—when the economics of a business fundamentally deteriorates or when the stock’s valuation has become too high.
Valuations Become Excessive
We also may sell a stock that increases in value—and becomes expensive relative to the fundamentals we anticipated. In this case, the stock has gone from discounted to expensive. This is a happier sell situation; the price has appreciated more than earnings have warranted.
Valuations Fundamentally Deteriorate
We’ll sell a stock when the company reports that they haven’t delivered what they said they would. The sooner we identify the underperformance versus estimates, the better off we are. It’s a sad day when a security is not performing as we initially believed it would.
Sell Discipline
We think it’s important to be disciplined when it’s time to sell a security as when to buy securities in your portfolio. Our sell decisions are based on two quantitative factors—when the economics of a business fundamentally deteriorates or when the stock’s valuation has become too high.
Valuations Become Excessive
We also may sell a stock that increases in value—and becomes expensive relative to the fundamentals we anticipated. In this case, the stock has gone from discounted to expensive. This is a happier sell situation; the price has appreciated more than earnings have warranted.
Valuations Fundamentally Deteriorate
We’ll sell a stock when the company reports that they haven’t delivered what they said they would. The sooner we identify the underperformance versus estimates, the better off we are. It’s a sad day when a security is not performing as we initially believed it would.