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Methodology
At Unit Economics, we bring a unique proposition to independent
research. We combine a fundamentally-oriented 'Unit Economics'
approach to modeling and forecasting company financials with a
‘pay for performance’ business model. The result adds weight to
share prices and investor sentiment in our decision-making process.
Identifying macro and thematic trends is crucial to formulating our
investment ideas. We publish research reports on our major themes
and trends and then we set out to find stock ideas, both long and
short, that bring alpha to our thesis.
We generate our stock ideas from stock screens, industry and
corporate contacts and through our macro/thematic news. Once
we identify potential investment opportunities, we pore over prior
conference calls, SEC filings and past earnings releases to form an
understanding of the business history and 'Unit Economics' of the
company. We typically contact company management for CFO-level
discussions of cost functions, capacity utilization and business
outlook, further refining our thesis. Only at this point do we talk to
contacts on the street and look for oversights and hole s in our
thesis. This diligence and deliberation - resisting the impulse to turn
too hastily to street analysts - produces fresh investment
conclusions untainted by conformity. Finally, we develop an
earnings model and test its ability to predict past earnings releases,
before looking forward to predict future earnings. Unlike most firms,
we publish the accuracy of the earnings model in every research
report for each company that we follow.
Most research firms stop here. But we understand that successfully
predicting the earnings of a company does not always make for a
successful investment. We take things one step further. We
incorporate street expectations and investor sentiment, gauged
through short interest, technical analysis, fund manager surveys,
options activity and open interest in sector funds or ETFs to
determine the suitability of the stock as an investment.
We then examine the risk/reward of our investment thesis and
determine what other variables may drive the shares, such as
consumer sentiment, GDP or energy prices. Lastly, we look at the
overall portfolio effect of adding the security to one of our portfolios.
Having passed all of these hurdles, the thesis is monitored
and refined as new information becomes available and the size
of the position is scaled to reflect increasing/decreasing
confidence, risk/reward and 'arbitrage' between our view and what
we believe is priced into the stock.
At Unit Economics, we bring a unique proposition to independent
research. We combine a fundamentally-oriented 'Unit Economics'
approach to modeling and forecasting company financials with a
‘pay for performance’ business model. The result adds weight to
share prices and investor sentiment in our decision-making process.
Identifying macro and thematic trends is crucial to formulating our
investment ideas. We publish research reports on our major themes
and trends and then we set out to find stock ideas, both long and
short, that bring alpha to our thesis.
We generate our stock ideas from stock screens, industry and
corporate contacts and through our macro/thematic news. Once
we identify potential investment opportunities, we pore over prior
conference calls, SEC filings and past earnings releases to form an
understanding of the business history and 'Unit Economics' of the
company. We typically contact company management for CFO-level
discussions of cost functions, capacity utilization and business
outlook, further refining our thesis. Only at this point do we talk to
contacts on the street and look for oversights and hole s in our
thesis. This diligence and deliberation - resisting the impulse to turn
too hastily to street analysts - produces fresh investment
conclusions untainted by conformity. Finally, we develop an
earnings model and test its ability to predict past earnings releases,
before looking forward to predict future earnings. Unlike most firms,
we publish the accuracy of the earnings model in every research
report for each company that we follow.
Most research firms stop here. But we understand that successfully
predicting the earnings of a company does not always make for a
successful investment. We take things one step further. We
incorporate street expectations and investor sentiment, gauged
through short interest, technical analysis, fund manager surveys,
options activity and open interest in sector funds or ETFs to
determine the suitability of the stock as an investment.
We then examine the risk/reward of our investment thesis and
determine what other variables may drive the shares, such as
consumer sentiment, GDP or energy prices. Lastly, we look at the
overall portfolio effect of adding the security to one of our portfolios.
Having passed all of these hurdles, the thesis is monitored
and refined as new information becomes available and the size
of the position is scaled to reflect increasing/decreasing
confidence, risk/reward and 'arbitrage' between our view and what
we believe is priced into the stock.