Insight’s Investment Process

Insight uses a disciplined, three-step process to evaluate the invest-able domestic universe of actively traded public companies. The process includes a proprietary quantitative analysis, rigorous fundamental analysis, and a stock price performance analysis. Step One: Quantitative Analysis The first step of the investment process identifies and ranks companies based upon their stock prices’ relative performance versus the market. Additionally, in order to mitigate relative investment risk we analyze the return series risk profiles. Our quantitative analysis is conducted across several time periods, and the universe of stocks is regressed against broad market indexes. We rank the universe of stocks based upon the ratio of alpha to standard deviation, which creates a list of stocks with the strongest history of outperforming the market while taking into account low historical variance relative to the benchmark index.

Quantitative analysis helps identify potential stocks for further research and is not relied upon exclusively for stock selection. Our quantitative process includes a relative strength (RS) score for each stock, which further narrows the number of companies that progress to the next step of our investment process.

Each Portfolio Manager prepares a weekly quantitative analysis report. However, Portfolio Managers can run specialized reports whenever necessary. For each strategy, we review the top-ranked 500 companies appearing on our quantitative reports. Typically, 7-10 new companies warrant detailed fundamental analysis. Step Two: Fundamental Analysis Approximately two-thirds of Insight’s investment process relies upon our analysis of a stock’s fundamentals. Our analysis seeks out companies with strong, sustainable growth in sales and earnings. Specifically, our analysts look for highly defensible competitive advantages, rapidly growing markets, and superior, value maximizing management.

Financial statements are studied to examine how successful the company has been in reinvesting its profits (ROE), debt leverage, margin improvement, cash generation, balance sheet strength, and overall quality of earnings and assets. We pay particular attention to a company’s market positioning, its reputation, the demand outlook for its products or services, the expected growth in the company’s addressable market, and competitive threats. We gather this information by analyzing company documents and SEC filings, meeting or interviewing company management, and contacting customers, suppliers, and industry analysts.

Wall Street research is analyzed in terms of potential consensus earnings changes that could impact a stock’s price. The Investment Committee closely reviews the analysis produced in Steps One and Two to determine the suitability of adding a stock to the product buy list. Particular emphasis is given to earnings growth and the sustainability of earnings growth. Step Three: Price Performance Analysis Before a stock is selected for purchase from the product buy list, the Portfolio Manager analyzes the relative strength (RS) of each stock to ensure that those stocks with favorable quantitative characteristics also have delivered high absolute rates of return. We calculate this RS number by ranking all stocks in the universe by performance over several time periods, with greater weight placed on the most recent data covering the time period in question. Before a stock is purchased, its trading history is reviewed in detail.