Investment Process
Aletheia’s Investment Process is the practical expression of its Investment Philosophy, and is at all times guided by evidence and empirical data, not opinion or sentiment.
Aletheia’s initial universe for investment ideas consists of all publicly-traded companies, with a preference given to companies with large market capitalizations. On a selective basis, Aletheia will invest in mid and small cap companies with incomparable and/or extraordinary fundamental characteristics uncovered through the same proprietary research process. It is important to note that Aletheia is not concerned as to whether or not the company is included in a particular index, or the current characterization of the company as a “growth” or “value” stock based upon historical data. We are insistent that each company meet each and every buy criteria.
This universe is then narrowed by the four main elements of our buy discipline, all of which must be “positive” and present in order for a company to enter a portfolio.
The elements are Aletheia’s proprietary industry research, the tracking of knowledgeable investor activity, quantitative forensic accounting and balance sheet analysis and the corroboration of an investment thesis with the firm’s independent research advisors. The firm’s proprietary industry research consists of industry trade journals and publications that are produced by and for industry professionals, and importantly avoids the “bad information loop” of Wall Street research reports and management-biased reports. The tracking of knowledgeable investor activity seeks to find active buying in stocks by corporate insiders, the company itself or external strategic investors. The research team constantly tracks a wealth of data including Form 4’s, Form 3’s and Form 144’s filed with the SEC by corporate executives and maintains databases to monitor share buybacks by corporations themselves. Aletheia, and specifically Peter J. Eichler, Jr., pioneered and developed this rigorous tracking and analysis of knowledgeable investor and insider activity over 25 years ago. Aletheia has demonstrated a proven ability to interpret this data thoughtfully on behalf of its clients. Aletheia also performs rigorous analysis of corporate balance sheets, primarily by its internal analysts but also supplemented by a handful of independent, external credit research firms. Although the firm does not employ “screens,” the tracking of these knowledgeable investors and our analysis of a company’s balance sheet do act as targeting mechanisms for fruitful investment ideas. Finally, the investment thesis must be confirmed by a healthy balance sheet and financial condition as well as by Aletheia’s independent research advisors. A visual representation of Aletheia’s Investment Process is shown below:
The process results in the companies with strong fundamentals at low valuations, supported by significant inflows from knowledgeable investors and the healthiest financial conditions. Depending on the strategy, there may be additional criteria that Aletheia looks for in companies before they can enter the portfolio, but Aletheia believes strongly it is a testament to the power and versatility of the Investment Process that it has been successfully implemented on a long-term basis across a wide range of strategies.
Peter J. Eichler Jr., is the architect of this process and has been successfully implementing it for more than two decades. While the process has not changed materially since inception and has been applied successfully across the product line, Aletheia continues to thoughtfully enhance the process by expanding its professional staff and constantly investing in its research and information technology resources.