Using our Service

Uncover Great Stock Ideas
In our opinion, cash flow growth and return on invested capital are the key drivers of any stock’s valuation. By focusing on various proxies for these data points and other factors such as fundamental quality, analyst revision momentum and relative value, we have been able to generate some terrific investment ideas and avoid some significant value traps.  Generally speaking, we try to find the best stocks that demonstrate solid growth at a reasonable price (GARP).  There are two ways investors can use our services:

Long-term Idea Generation
One way that investors use this newsletter is to generate a solid list of potential stock ideas to conduct further fundamental analysis.  On numerous occasions, new stock ideas have appeared on major sell side conviction buy and sell lists days or even weeks after they appeared on our list, as detailed in our “Nostradamus” report.  We have used ideas on this list to flush out our own detailed long-term analysis of stocks, as we have demonstrated with our reports on McKesson (MCK), Starbucks (SBUX) and others.

In a backtest back to 12/31/2004, including the tracking of real-time data since 12/31/2009 to 4/30/2011, we see that 12-month returns from our Core Long and Opportunistic Long portfolios returned on average 15%, with all the best 12-month returns averaging 150% and all the worst 12-month returns averaging -40%. This compares to the rolling cumulative 12-month average of the S&P 500 during this period of 3.92%, ranging from a high of 50% to a low of -45%.

For the more recent period 4/30/2009 to 4/30/2011, 12-month returns averaged 25% with the best returns averaging 69% and the worst returns averaging -17%. This compares to the rolling 12-month rolling average of the S&P 500 during this period of 14%, ranging from a high of 36% to a low of 3%.

Deeper fundamental analysis of stocks on this list might reveal some of the stronger, longer-term ideas.

Enhance Your Hedge Fund Strategies
Another way to use this newsletter is to build a model portfolio that re balances at the beginning of each month in a dollar-neutral position.  These model portfolios are derived from the Naive Model and are typically rebalanced monthly. At a minimum, we think that tracking the returns and decision making in our model portfolios would be useful to follow as an alternative benchmark index.

Ascendere Associates has been managing a long-only account since 8/31/2010 based largely in part by the Opportunistic Long Model Portfolio.  Returns are available on request.