Methodology

Unconventional Valuations

Ockham Research follows a four-step valuation process for individual securities. Our methodology is the logical result of decades of analysis combined with the discipline necessary to adhere to this framework.

1. Create a historical database of individual securities prices, sales, cash earnings, and dividends.
2. Assign valuation ranges for each security based upon the average annual highs and lows for price to sales, price to cash earnings, and dividends.
3. Utilize these valuation ranges as the bands to identify a stock’s conventional high and low valuations.
4. Identify stocks whose share price has moved outside of these conventional valuations.

Ratings Methodology

Our ratings methodology is a simple one: “Buy” ratings are reserved for securities that are priced below their average annual lows with respect to their normal per share metrics, “Hold” ratings are applied when a security is valued within its historical high and low range, and “Sell” ratings are applied when a security is priced above its average annual high with respect to its per share metrics.

An “oxymoron” is a combination of two contradictory words. In our opinion, “conventional” and “wisdom” are contradictory as they relate to traditional investment research activities. The poor performance record of professional investors is compelling evidence: we believe that you should be very suspicious of strong consensus among research analysts and "Wall Street" strategists.

Ockham Research is an independent equity research provider that seeks to combine the best techniques of traditional financial analysis with proprietary market analysis procedures. Market analysis tries to determine the extent to which the conclusions reached in the financial analysis process are already incorporated into the price of the security.

Marsh Douthat, CFA, the founder and president of Ockham Research, has been active in the investment field for nearly thirty years. He has established an excellent real-time performance record at Ockham. The Ockham investment strategy is best defined as "Contrary Opinion". Whenever and wherever a broad consensus develops in the securities markets, Ockham Research will be looking for opportunities to invest contrary to that consensus.

Benjamin Graham said in The Intelligent Investor (Harper & Row, 1973) that opportunity for consistent, above average results requires ...

“ ... policies which are inherently sound and promising and are not popular on Wall Street.”

Our research attempts to quantify consensus in the financial markets. We measure the intensity of investor sentiment at the market level and the individual equity security level. Complimenting traditional financial analysis with market analysis offers the investor enhanced possibilities of above average returns.