Alpha Generation

Superior information regarding the financial health of companies can empower investors to position themselves ahead of relevant trends in share prices, bond prices/spreads, credit default swap spreads and actions by the large rating agencies. Investors who can properly account for prevailing market and investment factors typically derive systematically superior investment returns.

FHRs™ are a highly valuable input into a portfolio manager's investment processes. As a proprietary methodology, FHRs™ are uncorrelated to market pricing measures such as option or share price volatility and the analysis is significantly broader and deeper than typical fundamental credit analysis. This provides the basis for spotting arbitrage opportunities ahead of the market. The FHRs' unique insight into companies' proximity to and momentum towards success or distress and their ability to maintain their competitive positions against their global peer groups can help identify investment opportunities for long and short investing.

Monsanto: FHR in Relation to Share Price

A directional change in financial health often predicts subsequent movements in share price. The graph above clearly shows that a consistent increase in FHR™ is followed by an increase in share price appreciation.

Long Short Strategy Summary

Homebuilding Sector Case Study