Process

• Step 1: Generate Investment Ideas
• Step 2: Research Securities
• Step 3: Conduct Fundamental Analysis
• Step 4: Sell Discipline

 

GENERATE INVESTMENT IDEAS:

Initially Sparrow screens databases (Value Line, Zacks, and Reuters) for industries and companies that show consistent earnings power over multiple economic cycles.

Research Securities:

Stocks are then scored using a proprietary matrix of various fundamental, quantitative, and technical factors. Some of these factors include:

• Above average earnings per share growth rates
• Above average return on equity
• Excess free cash flow
• Low debt to equity
• Shareholder friendly management
• High margin of safety

CONDUCT FUNDAMENTAL ANALYSIS:

We review the company's original source material such as quarterly and annual reports; participate in quarterly conference calls and web casts; read independent analyst reports from Value line, Zacks and Reuters; determine intrinsic value, margin of safety and best time to buy based on trading patterns.

SELL DISCIPLINE:

We sell when the original reason we bought the company no longer exists or when extreme overvaluations occur on a case by case basis.

 

RESEARCH SERVICES USED

1. Valueline, Reuters, Securities Research Company, and Zacks among others.
2. Monthly company webcast conference calls.
3. Street Research - Goldman Sachs and others.
4. Federal Reserve Data.