Methodology
🔬 Factor-Based Equity Methodology
Factor investing isn’t about guessing what’s “hot.” It’s about relying on what’s repeatable.
The factors we use—such as free cash flow growth, quality, valuation, momentum, sentiment, and stability—have outperformed consistently over the long term. Yet, like every strategy, it has its off-years.
💡 Since 2002, the top decile of our multi-factor stock model has crushed the broader market—returning ~50% annualized vs ~8% for the Russell 2000—while enduring similar drawdowns.
🎯 Our aim isn’t to beat the market every year, but to compound wealth at a significantly higher rate over time. That takes patience and discipline.
All-weather outperformance?
Factor investing isn’t about guessing what’s “hot.” It’s about relying on what’s repeatable.
The factors we use—such as free cash flow growth, quality, valuation, momentum, sentiment, and stability—have outperformed consistently over the long term. Yet, like every strategy, it has its off-years.
💡 Since 2002, the top decile of our multi-factor stock model has crushed the broader market—returning ~50% annualized vs ~8% for the Russell 2000—while enduring similar drawdowns.
🎯 Our aim isn’t to beat the market every year, but to compound wealth at a significantly higher rate over time. That takes patience and discipline.
The investable universe
Most stocks aren’t worth considering. Here's how we filter:
✅ Markets: US, Canada, and Europe
✅ Liquidity: Median daily trading value > €50k
✅ Share types: Only primary listings (no ADRs, duals, or prefs)
✅ History: At least 3 years of continuous price + fundamentals
We don’t force sector neutrality or style balancing. Let the factors speak.
Factors are like characteristics
Every stock that passes our universe screen is scored from 0–100 on each of the following:
| 🧪 Factor | 📏 Example measure | 🔍 Why it matters |
|---|---|---|
| Free Cash Flow Growth | YoY % change in free cash flow | Growth should be sustained, internally funded, and not reliant on leverage or external capital to scale. |
| Value | EBITDA / EV (sector-relative) | Attractive entry prices can reduce downside risk and boost long-term returns when paired with quality fundamentals. |
| Quality | Gross Profit / Total Assets | Strong unit economics and capital efficiency create resilience across cycles and enable reinvestment at high returns. |
| Stability | 10-quarter revenue volatility | Stable revenue streams signal predictable demand, low customer churn, and lower vulnerability to macro shocks. |
| Momentum | 200-day median total return of the industry | Market strength often reflects improving fundamentals; buying strength avoids value traps and accelerates compounding. |
| Sentiment | 8-week EPS estimate revisions | Positive estimate momentum tends to precede upward earnings surprises and institutional buying pressure. |
Each factor must pass at least 5 robustness checks:
📆 Works in multiple time periods
🌍 Works in multiple regions
🧪 Holds up in random sub-universes
🚫 Isn’t driven by outliers
🧠 Has sound economic logic
Only factors that survive this gauntlet are used.
Scoring & Ranking
We calculate scores weekly. Each stock gets a composite score (average of the six factors). This lets us rank the entire universe—highest composite = highest conviction.
We don’t overweight one “theme.” The magic is in the blend. Combining these signals makes the model more robust than any single factor on its own.
Portfolio management
🎯 We own the top 30 ranked stocks at any given time. That’s it.
🔁 Weekly rebalance rules:
- No trade unless a position changes >1% (or something similar, that limits transaction costs!)
- No position drifts more than +50% (again, a little drift is no issue, but too much is not preferrred)
- Total portfolio drift limited to 15% (see above)
- Slippage modeled from 0.1% to 1.5% based on liquidity (we want to be as realistic as possible)
📊 Weighting: The basic way to rank would be: position size = 50 – rank. So stock #1 = ~5%, stock #30 = ~0%. Dynamic but simple.
We like to go more advanced. Our models take into account potential returns and transaction costs to come up with a weighting, improving returns over the long term.
We keep an eye on turnover, to keep it reasonable—despite weekly refreshes.
Risk management
☣️ Risk isn’t about volatility—it's about being wrong. Here's how we protect ourselves:
Diversified across sectors, geographies, and factor types
No leverage. No shorting. No complex derivatives.
No story stocks, restructurings, or bankruptcies.
Liquidity filters ensure we can exit if needed.
By investing only in high-scoring, liquid, multi-factor stocks, we sidestep most landmines automatically.
Continuous improvement
🧬 This methodology is a living thing. New data, new ideas, and better ways to measure risk and reward are constantly tested.
But nothing gets added unless it passes the same 5-test robustness framework. That means no hype, no noise—just signals with real, repeatable edges.
How to use this
🔧 If you're a DIY investor, the full formulas are in the e-book.
🧾 If you prefer a plug-and-play feed of our top-ranked names, subscribe to our weekly updates.
💼 If you want full implementation, we offer managed solutions and custom mandates.
Bottom line:
We don’t predict. We rank.
We don’t listen to hype. We listen to data.
We don’t chase returns. We compound probabilities.
This is factor investing—refined, disciplined, and battle-tested.
The Best No-BS Factor Investing Platform for Smarter, Higher Returns.