Investment Approach

CornerCap’s investment approach is designed to objectively implement our investment philosophy of minimizing the impact of emotion in investment decisions and reducing the imbedded costs so destructive to long-term investment performance.

Our investment approach is embodied in two distinct ways:

  • Building and managing multi-asset class portfolios based on expertly balancing a client’s risk profile and time horizon
  • Buying and selling individual stocks based on Fundametrics® research process, our proprietary research system

In each of these, independent thinking, bottom-up fundamental analysis and a contrarian value discipline is at the core of our approach.

Our Investment Committee ensures consistent and objective application of our Investment Approach for each client. 

Multi-Asset Class Portfolios

Building a portfolio of diversified investment (asset) classes is the key to achieving long-term goals.

But we believe many advisors do not properly understand the pro's and con's of multi-asset class diversification. Blindly following the endowment model popularized by larger universities or foundations can lead to increased cost, diminished returns, and unintended consequences.

See our feature article "The Irresistable Melody of the Pied Piper" for our full analysis of the endowment model. To summarize our view: we believe that asset allocation strategies for most investors--to properly weather economic uncertainties over an investment cycle--must 1) reflect the principles of transparency, liquidity, and reasonable cost and 2) recognize that asset classes can behave very differently depending on the underlying economic regime.

This is why our approach to asset allocation incorporates an analysis of how different asset classes perform in various economic environments.

We take time to understand each client’s risk profile and near term and long term intentions, to create a customized allocation strategy that is diversified across various economic cycles with consideration to the client’s tolerance for risk, volatility and liquidity. Our goal is to maximize the expected return for the level of acceptable risk.

We construct our portfolios with investments that are simple and transparent, easy to rebalance and avoid imbedded fees. Volatility cannot be completely diversified, but it can be matched to an investor’s proper risk profile and goals.

Fundametrics® Research Process

Our investment approach for equity investments begins with an objective, quantitative evaluation of a wide range of stocks. Fundametrics® research process, our proprietary computer-based research tool, allows us to  screen and rank stocks according to specific valuation criteria or fundamental data. Fundametrics® recognizes the most attractive investment ideas and offers an objective “buy” and “sell” signal. 

Next, we conduct a qualitative assessment of this group of stocks, which includes:

  • Reviewing the inputs in Fundametrics® for accuracy and reasonableness.
  • Assessing the quality of earnings and cash flow of potential stock ideas.
  • Stress testing the balance sheet for risk.
  • Ensuring appropriate diversification along the industry supply chain.

Fundametrics® uses over 40 investment factors to determine the relative attractiveness of the stocks we are evaluating. We rely most heavily on a core group of factors that have proven to be the most discriminating and non-correlated, and when taken in the aggregate, tend to produce the stocks with the best return potential.

See the links in the sidebar for further details on each approach.

 

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Featured Topics

The market crash exposed weakness in the long-heralded “Endowment Model.”What did
we learn about it? And how do we think about structuring portfolios for uncertain times?

Keying off the Academy Awards last Sunday night, Tom Quinn, CornerCap Co-Founder and CEO, writes about the origins of our proprietary research system 30 years ago, putting it in context of the statistical approach championed by Oakland A’s general manager Billy Beane in 2002.

Fundametrics® Research Process

Financial pie chartThe Fundametrics® reserach process is our proprietary computer-based research system, which screens our universe of stocks and decile ranks them according to specific valuation criteria.

Read more about Fundametrics® >

Multi-Asset Class Strategies

Blindly following the larger university endowment model for diversification can lead to unintended consequences. Our approach rests on transparency, liquidity, and reasonable cost while recognizing that portfolios must be diversified across economic regimes.

Read More About Multi-Asset Class Strategies >