ThinkPerformance

Investment Philosophy

Our purpose is to produce for our clients competitive returns commensurate with their risk budget. Our philosophy begins with commitment to exercise discipline over emotion. Experience has taught us to augment our quantitative and fundamental analysis with subjective qualitative insight. Deciphering market expectations, human behavior, and investor psychology are integral elements of our investment philosophy.

We believe change creates opportunity. We believe a forward-looking perspective is the best way to exploit new opportunities that are being created in a constantly changing environment. Identifying emerging trends and understanding their influence on industry structure, competitive forces, growth, and profitability form the foundation of our growth investment philosophy.

We also believe growth stocks come from growth companies, and further, that a company’s true sustainable growth is developed internally. We put a premium on management’s ability to deploy marginal capital in opportunities that generate incrementally improved earnings growth. Growth resides internal to the company. Our task, then, as growth investors is straightforward: 1) discover these growing companies and 2) determine the extent to which their future growth prospects are inefficiently discounted.

Investment Process Summary

Credo Capital employs an investment process that reflects over two decades of experience analyzing and investing in growing companies. Our objective is to construct portfolios of growth companies that deliver consistently competitive investment performance over time – in all sectors through all economic and market climates. The hallmark of our investment process is our use of ABACUS, a proprietary, fundamental expectations-based scoring model. As an idea discovery tool, ABACUS accomplishes two goals. It keeps us true to our secular-growth style and it focuses our attention on stocks that may enjoy rising expectations – helping us stay ahead of the rest.

Once ABACUS narrows and prioritizes our initial universe of investment candidates, we perform independent fundamental research. To form our view, we scour financial statements, regulatory filings, publications, and transcripts and talk to as many companies, analysts, and industry experts as possible. We focus on morphing industry dynamics, potential competitive gains, capital requirements, and risks (real or perceived) to formulate our expectations for the next three years.

In our opinion, it is not enough to simply understand the fundamental drivers of growth, the key investments required to sustain or augment growth, and the risks fundamental to the business. As investors, we have to be able to generate attractive risk-adjusted returns investing in the underlying stock. Hence, valuation analysis is the next step in our process. Specifically, we seek to exploit what we perceive as market inefficiencies. Our different perception may be related to one or more of the following parameters including a companies’ prospective rate of growth, appropriate risk premium, or exit p/e multiple.

Lastly and importantly, we aim to construct portfolios of stocks that outperform our peers and the passive benchmark. We employ a sector neutral strategy and hence capture the same risk dampening characteristics of uncorrelated sector returns and risks inherent in the benchmark. We also advocate such a position because it highlights our stock selection skill and serves to streamline our decision making process. Additionally, the risk of unintended sector bets or untimely sector rotation is removed from our process.