Investment Strategies for Consistent Growth
We consistently adhere to a Growth At a Reasonable Price (GARP) approach as the primary driver of returns. Our definition of GARP is advantaged growth simultaneously with cheaper valuation.
Coincident with this approach, bottom up security analysis is most important in discriminating between the stocks we hold and those we don’t. Top Down emphasis is not sought, and in fact we endeavor to remain closer to benchmark in style elements such as correlation, GICs sector weights, market capitalization and generally equally weight positions.
We begin our equity security selection process by reviewing the universe of stocks that are US Listed only, Russell 3000, Russell Mid Cap and with a market capitalization floor of $500 million. Security selection begins with multiple quantitative screens, ensuring that passing stocks have traits consistent with Aurora’s Growth At a Reasonable Price (GARP) philosophy. Specifically, each passing stock will have advantaged growth simultaneously with cheaper valuation. We run 12 different screens with slightly different criteria definitions of growth and value- but always with the intent of ensuring each passing stock has elements of growth simultaneous with cheap valuation. Roughly 250-300 securities typically pass through this quantitative screening.
Cross referencing qualitative data gained from Management Discussions/Conference Call dialogue with Street research reports, competitor reports, 3rd party data providers and elsewhere is also important to set the context of reported results. Bloomberg data and analytics are also utilized.
The goal of this more qualitative effort is to gain confidence that what the GARP screens have identified as attractive is likely to be sustainable for the next 1-3 years. Typically, this fundamental analysis is exclusionary in nature, in that we find reasons NOT to own companies and discard them from the remaining companies in which we might choose to invest.
Individual security analysis is done with the intent of gaining an understanding of the dynamics that are driving a passing company’s fundamentals.
Specific attention is paid to accounting conventions and assumptions. Analyzing 10K and 10Q footnotes allows for the assumptions embedded in reported results to be understood, and can be essential to understanding the influences on reported results.