Equity Style Fundamental Analysis

The purpose of Johnston Investment Counsel's fundamental analysis is to evaluate the relative attractiveness of a particular investment style. Johnston Investment Counsel's analysis is performed on a nationality basis (U.S. versus international), company size (large, mid, small) and investment approach (value, growth) characteristics. Some of the the fundamental factors evaluated include:

• Valuation: (price-to-earnings, book, cash flow, and sales)
• Profitability: (return on equity and assets)
• Growth: (earnings)
• Attractiveness to other asset classes (earnings yield vs. corporate bonds)

Bond Fundamental Analysis

With respect to bonds, some of the fundamental factors analyzed include:

• Quality and maturity spreads
• Real interest rate using expected inflation

Johnston Investment Counsel can evaluates how one variables current level compares to its historical relationship. By also incorporating measures of volatility, Johnston Investment Counsel is able to determine whether one investment style is fundamentally "cheap" or "expensive" versus another investment style. However, investment styles may stay cheap or expensive for a period of time. Johnston Investment Counsel also evaluates the technical characteristics of the investment style.

 

 

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