Value, broadly defined.

March 31st, 2007 by Rick Drain

The basic analytical work for the fund will be to determine value, and compare it to price.

By value, I mean an economic common-sense understanding of the word. In a Buffet-like way, I’m asking, “would I pay this amount (the market cap) to own this entire company?” I am specifically not using the mutual fund industry’s simple definition of “Value = low P/E”. There’s more to it than that.

Another way this approach is sometimes described is Growth at a Reasonable Price (GAARP). That, too, only partially captures my approach.

The fund will buy the best values (subject to further screening for good corporate citizenship) and sell short the worst values.

By being long-short, the fund should be less volatile than the overall market.