There are no shortcuts to successful investing. You must have a fundamental understanding of each company in which you invest, as well as a firm grasp on the economic and market forces that may impact each company. This is why we have made a substantial investment in our internal research department. Our comprehensive, multi-disciplined approach integrates top-down perspective and bottom-up insight. Through these two different but complementary directions of analysis, we arrive at the sweet spot of successful investing.
Our top-down research provides the “big picture” perspective for all of our investment decisions. It is used to evaluate the state and direction of the economy and markets, to identify specific industries for investment and to manage exposure to overall market risks. The process begins with an intensive, broad-based global analysis of macroeconomic factors, investment themes and industry trends, both from a secular and a cyclical standpoint. It culminates in a formal economic outlook from which we set our market strategy – the bridge between our economic research and specific investment recommendations. The top-down research process is led by Barrington’s founder, Alexander Paris, a well-known and respected free-market economist who has been advising on the economy and markets for over 30 years.
Our bottom-up research is the basis for our stock selection and is based on proprietary, in-depth fundamental analysis. Our analysts follow a rigorous and time-consuming approach. Going beyond the reported financials and disclosures, our analysts are out in the field meeting regularly with corporate managements, visiting operating facilities, and talking to suppliers, customers and competitors to get the “color” behind the numbers. After completing their fieldwork and other fact-finding efforts, analysts synthesize their information, build financial models, make forecasts and establish valuations.
The ultimate goal is to uncover “good businesses” that have the potential to become “great stocks.” Some of the criteria we consider important in identifying “good businesses” are: strong management, proprietary products and services supported by macroeconomic/market trends, market leadership, good profitability, above-average growth and financial strength. We especially like to find these companies before other investors do, which is why we have an affinity for undiscovered, overlooked or misperceived companies.
Once we’ve identified a “good business,” we then assess its potential to become a “great stock.” This is where our growth-at-a-reasonable-price investment discipline becomes instrumental. While we would like to invest in quality companies with attractive growth prospects, we do not want to overpay for the privilege. In determining a reasonable price, we utilize a number of valuation metrics and methods including both quantitative/qualitative and intrinsic/relative methods. The last element of a “great stock” is a catalyst to drive the share price higher, such as new products, management changes, earnings surprises, acquisitions or divestitures.
Our research is conducted by a team of award-winning analysts, many of whom are “Best on the Street” according to The Wall Street Journal. Many hold advanced degrees and professional designations including CFAs, CPAs, MBAs, and JDs. The team is experienced and market tested with the average analyst investment experience of over 20 years. As a discipline, analysts routinely commit their opinions and recommendations to writing. In fact, many of our published reports are frequently quoted in the media and are available to our clients.
Copyright 2006 Barrington Research Associates, Inc. All rights reserved.