As coincidence would have it,it’s about time we got you some more detail on Caesar, Camarda’s “new” proprietary individual stock strategy, which is intended to target the sort of quality-on-the cheap stocks, paying nice dividends, that we expect will get us winningly through the bumps ahead. Camarda began R&D-ing this last May (and experimenting with Jeff’s money as is our habit when we develop new techniques) in anticipation of the rocky times we foresaw in the investment markets, which, alas, have come to pass over the past 1/3rd year or so. In talking with many of you over the past few months, I noticed that while you have been invested in Caesar stocks for some time, the name has not rung a bell.
Caesar is named, of course, for the eponymous Roman general-cum-Emperor who transformed Rome. It typically holds 20 individual stock positions, picked by your Portfolio Board according to the rules below. For those who desire a more technical description, please see the Board’s internal Strategy Overview below. Hope you like it, and hail Caesar!
Summary of Caesar Buy Rules
- Assemble universe of potential value stocks from respected sources
- Rank stocks by annualized 5 year return (ROI) based on current price, target sell price, and dividend yield. Stocks with dividend yields over 3% have priority!
- Top 20 ROI stocks subjected to deep screen: a. Original research report prepared and must be approved b. DEEP fundamentals screen passes test c. Technical alert screen passes test d. Initial (and ongoing) adverse news check passes test
Caesar Strategy Overview
Caesar is an opportunistic strategy that seeks to buy quality value opportunities at depressed prices. The portfolio will generally be comprised of 20 generally equally weighted components, though weights will change over time based on relative performance. Technical analysis may be used to define recent historical low points (generally one year) and target purchases at reasonable lower levels which sometimes are seen around news, earnings, general market drops, or other events. We generally identify attractive value opportunities based on traditional fundamental analysis, and assign a Target Sell Price, based on internal and outside analysis which we believe would reflect fair valuation, then perform a hypothetical Return On Investment (ROI) using current price level as input cash flow, trailing twelve months dividend payments as annual output cash flow, and Target Sell Price as final output cash flow, over a five-year investment horizon. Attractive stocks on our buy list are then ranked by this hypothetical ROI. There is a strong bias, but not a requirement to acquire stocks with attractive dividend yields. Stocks trading near the top of our RIO rank list that have attractive dividend yields are flagged as attractive, and these are subject to an additional due diligence screen including a review of company and industry quality and prospects, fundamental metrics validation, and a technical analysis prognosis. Stocks that pass this screen are proposed for purchase and discussed/voted by the Portfolio Management Board; purchase orders may be entered for them after a final adverse news check.
Owned stocks will be regularly monitored, and our analytic metrics are regularly updated. Stocks will be considered for sale when they approach their Target Sell Price, as amended from time to time, when more attractive candidates present, or when adverse news or research is encountered, or where the technical analytical prospects deteriorate significantly and such weakness is deemed justified by adverse news or fundamental deterioration.
Undeployed cash may be kept in cash instruments, or temporarily deployed into short term vehicles, index funds or other investments as the Board votes to. Where cash is deployed to index funds or other market exposure vehicles on a temporary basis while awaiting attractive individual stock opportunities, a “buy the dip” mindset may be employed. Investors should assume it is possible that that some funds may remain in cash.
