RPA conducts fundamental security analysis as part of its bottom-up investing process. The process starts with an investment idea. We have many sources – something that was read, talked about or experienced. We have developed a base of knowledge in industries with strong secular trends. Examples are water, clean energy and healthy food.
To analyze the opportunity, we inspect financial statements, build earnings models incorporating company specific issues and economic trends, and derive a price target using historical trading multiples, peer group comparisons and our discounted cash flow models.
We believe the best way to control risk is to not overpay for investments. Diversification is defined in absolute terms, not in reference to benchmark sector weightings. Individual position weights are closely monitored to further minimize risk. News events, share price movement, or the discovery of a more promising investment may lead to a change in weighting.