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Targeting - Finding Investors that Match Your Company.

Valuation Technologies seeks out investors that want to buy stock in companies like yours. In addition, we provide insight into each investors stock selection process. This insight lets you start a conversation by focusing on the most important issues for the investor.

Each investor has his own style of selecting stocks, but the vast majority are looking for stocks expected to outperfrorm the average stock (risk adjusted).

We obtain this information by examining the list of companies each investor owns, the companies the investor is selling, and those he is buying. We then check which of the valuation methods (or models) best explain his behaviour. Knowing which models are most important to the investor, we match each potential investor with your company. The investors that pay attention to models that match your company are selected as most likely to buy. You then get a list of targets, with a list of the valuation methods of most importance to the investor. Below is a typical page, showing a potential investor for BARRA Inc.

The top of the page shows the name of your company (in this example BARRA), date of analysis (March 31, 1998), and current price ($28.50)

The next section shows the name of a potential investor (Laifer Capital Management), with the contact name and address. Additionally, you will see the four valuation approachs (or models) of most importance to the investor. Next, Model Match compares your company with the average value for each model in the investor's current holdings. Model Match can be Very High, High, Low, or Very Low. This section also shows the size of the investor's US stock holdings ($110 million), and the number of shares he holds of your company's stock. For a Targeting report, the number of shares held will always be 0.

Next, we show the models in graphical form, in order of importance to the investor. This example examines Historical Alpha, the second most important model to Laifer Capital. This model is based upon the idea that long term relative strength helps predict future return. Relative Strength is the return to the stock, net of the return of the average stock. The models are built so the average company has a value of 0, and 66% of the companies have values between -1 and +1. Thus a stock that has performed like the average of all stocks will score a 0, a stock that scores a 1 exibited a relative strength higher than all but 17% of all stocks. The grey area on the chart shows the model score for 66% of all stocks.

The yellow vertical bar shows the value of the Historical Alpha model for our sample company. Our sample company has about a 1.0 score, indicating a high relative strength, a value greater than all but 17% of stocks.

Notice the three horizontal bars. Each of the horizontal bars depicts Historical Alpha for a different list of stocks. These lists are Laifer's most recent buys, current holdings, and most recent sells. The center horizontal bar corresponds to the Historical Alpha, or Relative Strength, of the Laifer's current investments. The white circle on the bar gives the average value of Historical Alpha for Laifer's current holdings. Since the white circle is about +0.8, we know that Laifer likes to hold stocks that have performed well.

The blue portion of the bar shows the range of Historical Alpha in which 66% of Laifer's holding are located, while the extreme of the bar shows the maximum and minimum value of Historical Alpha.

The bar at the top shows the same analysis for recent purchases, while the bottom bar shows recent sales. We see that the average buy is about 0.9, the average holding is 0.8, and the average sell is 0.2. Thus Laifer Capital is buying more succesful stocks, and sell those which have not done as well. Since our sample has a Historical Alpha in the high range, we have a good match.

A similar set of bars shows the Value-Growth profile of Laifer's holdings, buys and sells. Negative values of Value/Growth indicate Growth stocks, while positive values indicate Value stocks. Laifer is buying and holding Growth stocks, and selling stocks that are neutral. This strategy is consistant with their tendancy toward high Historical Alpha. Again our sample fits within Laifer's approach.

The bottom of the chart shows the scale, and the Legend, to remind you of the meaning of the bars.