About Portfolio
In today’s markets, identifying truly undervalued companies requires a rigorous and disciplined approach. xValue, our meticulously crafted value-oriented portfolio, is designed to do just that. We employ a sophisticated, multi-factor quantitative model that identifies companies trading at significant discounts to their intrinsic value, offering you a powerful engine for potential long-term returns.
Why Invest in Value?
Time-Tested Strategy:
Value investing, the practice of buying assets for less than their intrinsic worth, has a long and proven track record of outperformance over the long term. xValue is built on this foundational principle.
Margin of Safety:
By investing in companies trading below their perceived true value, we aim to create a “margin of safety,” potentially mitigating downside risk and enhancing the potential for future gains.
Contrarian Approach:
The xValue portfolio often takes a contrarian stance, identifying companies that may be temporarily out of favor with the market but possess strong underlying fundamentals.
The xValue Advantage:
Our approach goes beyond simple valuation metrics. We utilize a sophisticated, multi-factor model that incorporates a range of key value indicators to identify deeply undervalued companies. These factors include:
Price-to-Book
(P/B) Ratio
Compares a company’s market capitalization to its book value of equity, highlighting companies trading at a discount to their net asset value.
Enterprise Value to
EBITDA (EV/EBITDA):
Measures a company’s total value (including debt and equity) relative to its earnings before interest, taxes, depreciation, and amortization, providing a more comprehensive valuation metric.
Price-to-Sales
(P/S) Ratio:
Compares a company’s market capitalization to its revenue, useful for valuing companies that may not yet be profitable.
Price-to-Earnings
(P/E) Ratio:
Compares a company’s stock price to its earnings per share, a classic indicator of relative value.
Quantitative Selection Methodology:
The xValue portfolio employs a rigorous, multi-factor quantitative model to identify companies trading at significant discounts to their intrinsic value. Our methodology is designed to be robust, objective, and transparent. Here’s a breakdown of the key steps:
- Factor Selection: We focus on four well-established value factors known to be predictive of future returns:
- Price-to-Book (P/B) Ratio
- Enterprise Value to EBITDA (EV/EBITDA)
- Price-to-Sales (P/S) Ratio
- Price-to-Earnings (P/E) Ratio
- Data Preparation and Winsorization: To ensure the integrity of our analysis and mitigate the impact of extreme outliers, we apply a winsorization process to each fundamental variable. For each factor, we rank companies within each country. Values falling below the 5th percentile or above the 95th percentile are then capped at the 5th and 95th percentile values, respectively. This process reduces the influence of extreme values while preserving the overall distribution of the data.
- Z-Score Standardization: After winsorizing the data, we calculate a Z-score for each company and for each factor. The Z-score is a standardized measure that indicates how many standard deviations a particular data point is from the mean of the distribution. This standardization allows us to compare and combine factors that are originally measured in different units (e.g., ratios, currency values). The formula for calculating the Z-score is:
Z = (X – μ) / σ
Where:
- X is the individual company’s winsorized factor value.
- μ is the mean of the winsorized factor values (within the country).
- σ is the standard deviation of the winsorized factor values (within the country).
- Composite Value Score: We then combine the individual factor Z-scores to create a composite value score for each company. This composite score represents a holistic measure of a company’s undervaluation across multiple value dimensions. Equal weights are assigned to create this composite score.
- Portfolio Construction: Companies with the lowest composite value scores (indicating the greatest degree of undervaluation) are considered for inclusion in the xValue portfolio, subject to liquidity and other portfolio construction constraints.
This systematic, data-driven approach allows us to identify and capitalize on opportunities where the market may be significantly underpricing a company’s true worth. Our methodology is continuously monitored and refined to ensure its ongoing effectiveness.
Strategy Available For:
