The Best Defense is a Good Defense.

Perkins value-oriented approach is based on the belief that investing in a diversified portfolio of high-quality, yet undervalued stocks can lead to outperformance of a benchmark over time. We believe that by conducting rigorous downside analysis before determining upside potential, we will identify companies with favorable reward-to-risk trade-offs over a full market cycle.

OUR THREE-STEP INVESTMENT PROCESS

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STEP 1 - Identify & Qualify Opportunities

IDENTIFY UNDERVALUED COMPANIES

  • Stocks that have underperformed in the most recent 6-18 month period
  • Attractive relative and absolute valuation ratios (P/E, P/BV, P/CF)
  • Sector-specific screening

DETERMINED WHAT WE BELIEVE TO BE HIGH QUALITY COMPANIES

  • Thorough fundamental analysis
  • Strong balance sheets
    • Low debt ratios
    • Financial flexibility
  • Solid recurring free cash flows
  • Committed and tenured management with significant insider ownership

STEP 2 - Calculate Reward / Risk Ratio

DETERMINE CONSERVATIVE DOWNSIDE PRICE TARGET

  • Model top line contraction and margin compression
  • Stock valuation comparisons to previous trough or recession levels
  • Margin of safety

DETERMINE REWARD-TO-RISK RATIO

  • Reward/risk should be at least 1.5 to 1.0, or 2.5 to 1.0 for riskier companies

DETERMINE CONSERVATIVE UPSIDE PRICE TARGET

  • Normalized margins and earnings
  • Stock valuation comparisons to previous normalized (not peak) levels
  • Emphasize mean reversion

STEP 3 - Build Diversified Portfolios

START SMALL AND BUILD POSITIONS GRADUALLY

  • Initial positions 30-50 bps
  • Maximum positions size 4%

BUILD DIVERSIFIED PORTFOLIOS

  • Benchmark aware
  • Typically, no more than 20% in any sector, with exception of financials, which is limited to 35%

REWARD/RISK RATIO DRIVES PORTFOLIO MANAGEMENT DECISIONS

Reward/Risk Ratio chart