Methodology

🔬 Factor-Based Equity Methodology

Factor investing isn't about guessing what's “hot.” It's about relying on what's repeatable.

The factors we use—such as free cash flow growth, quality, valuation, momentum, sentiment, and stability—have outperformed consistently over the long term. Yet, like every strategy, it has its off-years.

💡 Since 2002, the top decile of our multi-factor stock model has crushed the broader market—returning ~50% annualized vs ~8% for the Russell 2000—while enduring similar drawdowns.

🎯 Our aim isn't to beat the market every year, but to compound wealth at a significantly higher rate over time. That takes patience and discipline.

All-weather outperformance?

Factor investing isn't about guessing what's “hot.” It's about relying on what's repeatable.

The factors we use—such as free cash flow growth, quality, valuation, momentum, sentiment, and stability—have outperformed consistently over the long term. Yet, like every strategy, it has its off-years.

💡 Since 2002, the top decile of our multi-factor stock model has crushed the broader market—returning ~50% annualized vs ~8% for the Russell 2000—while enduring similar drawdowns.

🎯 Our aim isn't to beat the market every year, but to compound wealth at a significantly higher rate over time. That takes patience and discipline.

The investable universe

Most stocks aren't worth considering. Here's how we filter:

✅ Markets: US, Canada, and Europe

✅ Liquidity:Median daily trading value > €50k

✅ Share types: Only primary listings (no ADRs, duals, or prefs)

✅ History: At least 3 years of continuous price + fundamentals

We don't force sector neutrality or style balancing. Let the factors speak.

Factors are like characteristics

Every stock that passes our universe screen is scored from 0–100 on each of the following:

Growth

Ideally, a firm’s revenue and gross-profit growth stay steady, outpace peers, and keep accelerating, while gains in operating income, EPS, and free cash flow remain strong and continue to rise.

Valuation

Acquiring a company at a modest entry multiple can materially lift its future share returns. Since valuation can be gauged in many ways, the goal is to have each metric look compelling at the moment of purchase.

Quality

Backing firms that sustain key returns on capital over time has proven to be the most efficient way of allocating capital. We seek businesses able to withstand shifts in macro-environments and retain high and stable margins.

Stability

A sound balance sheet should stay steady versus its own history and align with the Profit & Loss statement; sudden jumps in tangible assets or sharp shifts against sales are clear red flags.

Sentiment

Sentiment signals — such as shifts in estimates or short interest — reveal stocks the market deems attractive or overly pessimistic, and weaving them in strengthens any equity strategy.

Technicals

Industry trends — whether in a stock’s price or in its fundamentals — can augment an existing strategy. Energy companies outperformed in the pre-GFC period, while technology companies rose during the 2010s.

Size

Focussing on overlooked companies has added benefits. These companies are usually small — large hedge funds and institutions find little value in them, but for smaller investors they are the Rosetta stone.

Each factor must pass at least 5 robustness checks:

📆 Works in multiple time periods

🌍 Works in multiple regions

🧪 Holds up in random sub-universes

🚫 Isn't driven by outliers

🧠 Has sound economic logic

Only factors that survive this gauntlet are used.

Scoring & Ranking

We calculate scores weekly. Each stock gets a composite score (average of the six factors). This lets us rank the entire universe—highest composite = highest conviction.

We don't overweight one “theme.” The magic is in the blend. Combining these signals makes the model more robust than any single factor on its own.

Portfolio management

🎯 We own the top 30 ranked stocksat any given time. That's it.

🔁 Weekly rebalance rules:

• No trade unless a position changes >1% (or something similar, that limits transaction costs!)
• No position drifts more than +50% (again, a little drift is no issue, but too much is not preferrred)
• Total portfolio drift limited to 15% (see above)
• Slippage modeled from 0.1% to 1.5% based on liquidity (we want to be as realistic as possible)

📊 Weighting:The basic way to rank would be: position size = 50 – rank. So stock #1 = ~5%, stock #30 = ~0%. Dynamic but simple.
We like to go more advanced. Our models take into account potential returns and transaction costs to come up with a weighting, improving returns over the long term.

We keep an eye on turnover, to keep it reasonable—despite weekly refreshes.

Risk management

☣️ Risk isn't about volatility—it's about being wrong. Here's how we protect ourselves:

Diversified across sectors, geographies, and factor types

No leverage. No shorting. No complex derivatives.

No story stocks, restructurings, or bankruptcies.

Liquidity filters ensure we can exit if needed.

By investing only in high-scoring, liquid, multi-factor stocks, we sidestep most landmines automatically.

Continuous improvement

🧬 This methodology is a living thing. New data, new ideas, and better ways to measure risk and reward are constantly tested.

But nothing gets added unless it passes the same 5-test robustness framework. That means no hype, no noise—just signals with real, repeatable edges.

How to use this

🔧 If you're a DIY investor, the full formulas are in the e-book.

🧾 If you prefer a plug-and-play feed of our top-ranked names, subscribe to our weekly updates.

💼 If you want full implementation, we offer managed solutions and custom mandates.

Bottom line:

We don't predict. We rank.

We don't listen to hype. We listen to data.

We don't chase returns. We compound probabilities.

This is factor investing—refined, disciplined, and battle-tested.