Investing Philosophy

MarketGrader was founded on the belief that owning stocks is the best way for investors to capture the growth of the world's economy in the form of shareholder returns. We feel this applies to all countries and regions as long as their equity markets follow a clear set of rules that include rigorous, transparent and enforceable accounting and reporting standards for the companies listed on their exchanges. We also believe that consistent creators of economic value, regardless of size and domicile, are the best long-term creators of shareholder value.


Further, by investing in stocks through an index, investors can improve their chances of long-term success by adding diversification to the inherent benefit of owning stocks. If the members of an index are selected based on the quality of the companies' fundamentals, with each having the chance to contribute equally to its performance, our belief is that returns will be enhanced over traditional indexes, as proven by MarketGrader's Indexes for more than a decade and a half.


Fundamentals

In today's high-frequency financial markets, "fundamental analysis" has become a catchall term in the crowded space of stock research. It is seen by many as out of touch or even useless at a time when market performance is measured in thousandths of a second. At MarketGrader, we believe that precisely because of today's focus on speed and the short term, fundamental analysis-in the time-tested, old-fashioned tradition of security analysis-is more important and relevant than ever. For over 15 years, our research has focused on truly understanding a company's business, or its fundamentals, as reported in its financial statements. We seek to understand how successful and profitable each company is in order to help clients separate the good from the bad investment prospects. We analyze businesses and the prices for which they're selling to help our clients extract shareholder value. And MarketGrader's indexes collect the best businesses across regions, countries, sectors and market cap segments.


GARP: Straddling Growth and Value

For decades investors have been offered what we believe is, unnecessarily, a false choice between owning growth or value stocks. Entire sets and families of benchmarks, investment products and strategies have been constructed around this binary concept.

At MarketGrader we like to take a middle ground approach to owning stocks. We believe investors can own stocks with attractive growth and valuation characteristics within a carefully designed and thoughtful portfolio as long as the methodology that underlies the selection of its constituents is rigorous, agnostic to size and business model and sourced with high quality data. This is what our research does.

MarketGrader's fundamental analysis is constructed using 24 individual indicators, which form the building blocks of our fundamental rating for every stock under coverage, across all markets globally. These 24 indicators are broken down into four core analytical categories: Growth, Value, Profitability and Cash Flow. The sum of all these indicators results in an overall grade between zero and 100, representing the final rating for the stock.

Thus, the supposed conflict between growth and value that exists within many other analytical investment frameworks does not exist in ours. On the contrary, the dynamics of combining six growth and six value indicators with 12 that measure how well the company is run and how successful it is at what it does, is what makes MarketGrader's research thorough and unique. The coexistence of growth and value in our analytical framework and, by extension, in our indexes, allows our clients to invest with the conviction necessary to achieve consistent, long-term returns without compromising on quality, diversification or liquidity.


Transparency

While preached by many, true transparency in the selection and construction of investment portfolios often remains elusive. Passive benchmarks offer investors a transparent and cost-efficient way of owning large segments of the market or the entire market itself. Today's so-called "smart beta" indexes, which offer various new ways to gain added exposure to particular investment factors beyond traditional benchmarks, are predicated on the importance of adhering to transparent methodologies.

While MarketGrader's Indexes adhere to the core principles of passive, low cost investing, combined with a selection methodology that is fundamental in nature, we believe that in constructing and maintaining them we have achieved a level of transparency that has been long sought in our industry. On any day, our clients may view not only all the components of any of our Indexes, but the MarketGrader Overall Grade of each one of its constituents and the 24 fundamental indicators from which such grades are derived. Our research platform allows clients to drill down to the bottom of each one of these indicators and to the company financials from which they are constructed. All of our grades, across all companies globally, are recalculated daily and made available to all of our clients simultaneously, wherever they are.


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