Investment Process

Portfolio Construction

Step 1: Quantitative Analysis

Our process begins with Tandem’s proprietary ratio — a multi-factor model which is applied to a universe of 2600+ stocks. The ratio helps identify companies that meet our fundamental requirements — those companies with consistent earnings growth and sales growth that are trading at a good valuation.

Step 2: Semi-Quantitative Review

Tandem performs fundamental research of the companies identified in step one. This includes reading company filings and listening to company conference calls. The team eliminates companies from investment consideration for various reasons. While there are several reasons for exclusion, three examples include 1) a dividend cut, 2) inconsistent or lack of growth in cash flow, or 3) the hiring of a CEO from outside of the company. Stocks ‘ranked to buy’ proceed to the next stage.

Step 3: Human Intervention

Stocks that have passed through fundamental analysis and are ‘ranked to buy’ make it to this stage. The investment team analyzes the business for sustainability, assesses business risk, and reviews all of their prior research on the stock. Stocks that pass this step move on to the final stage.

Step 4: Technical Analysis

The team identifies entry and exit points based on a stock’s price history (looking at moving averages, support and resistance). Price action determines key entry and exit points.

Sell Discipline

Tandem’s sell discipline is prescribed by methodology and is not subject to sentiment, emotion or interpretation.

Fundamental Sale

  • A stock violating our fundamental requirements will be sold.

Valuation Sale

  • A stock meeting our fundamental criteria but considered overvalued will have ≈ 25% of our position sold.

Significant Price Movement

  • A stock experiencing significant relative price appreciation will have ≈ 25% of the position sold.
  • A stock experiencing significant relative underperformance is reviewed.