Methodology on Ockham

Ockham Research Methodology
Influenced by Ben Graham’s writings, we focus on identifying securities whose price is out of line with fundamentals.
Long-Term Investing with a Value Core
There are many different theories for stock valuation; ours was developed by Ockham Co-founder Marsh Douthat throughout his many years of managing money. Fond of saying, “conventional wisdom is an oxymoron,” Mr. Douthat was keen to identify stocks that had fallen out of favor and were dragged down unjustly by the market and whose value would eventually be recognized. The resultant approach is adept at finding securities that are mispriced for their expected long term value.

The methodology itself is not complicated and takes into account fundamental data such as cash earnings, revenue, dividends, return on equity, etc. Essentially, we follow a four step process, which is outlined here.
  • Create a historical data base of an individual security’s prices, sales, cash earnings, and dividends, etc.
  • Assign valuation ranges for each security based upon the average annual highs and lows for price to sales, price to cash earnings and dividends.
  • Utilize these valuation ranges as bands to identify a stock’s conventional high and low valuations in the market.
  • Identify stocks whose share price has moved outside of these conventional valuations.
If it sounds simple, that’s because it is. In the spirit of Ockham’s Razor, this rubric is insightful and direct, thus eliminating confusion at times of decision making in extreme market volatility.

Our methodology combines empirical conclusions derived from two decades of analysis with a strict adherence to the abiding principles derived from those conclusions.

We think that this is a very appropriate way to get a baseline reading on a stock’s valuation. From this base understanding, investors can make more informed investment decisions.