Research Process

VBA's research process emphasizes fundamental analysis, discipline and patience towards investing in small-cap stocks.

A small part of our research efforts are spent on studying the economic cycle and on the identification and understanding of secular trends that will be unfolding in the future. However, the majority of our time is spent on the identification and analysis of individual companies that are prepared for the economic and secular trends that we see developing. The emphasis in our research process is placed on "bottom-up” analysis to ensure that the companies selected for investment are truly undervalued and are of the highest quality possible.

Given our long investment horizon and the fact that many of the companies we invest in have low liquidity, we feel that conducting our own in-house research is crucial to our success. Brokers’ research is utilized as a reference but is clearly insufficient for our specific investment style and philosophy.

At VBA, our research process consists of the following steps.

1. We regularly undertake computerized screening of stocks to flag undervalued and interesting companies that fit into our long-term scenarios for growth. Once these companies are identified, the real research process begins.
2. In order to understand the long-term strategy of a company and ascertain the quality and commitment of management to the firm, we perform an extensive interview with management and a visit to its operating facilities. This is the first part of our due diligence process.
3. Interviews with competitors, suppliers and customers are then performed. This provides us with valuable feedback to assess the competitive positioning of the company as well as a confirmation of management’s credibility.
4. At this point, if we are satisfied with the quality of the firm and of the viability of its strategic plan, we undertake a detailed five-year financial evaluation. We derive our own in-house projections of the firm’s financial performance, including full income statement, balance sheet and cash flow statement. We also conduct an assessment of the proper valuation parameters to be used for the company.
5. Once the above steps are completed, VBA undertakes an evaluation of expected returns given high and low valuation parameters which have applied to this type of investment. An appropriate "buy zone" is then established for our entry point into the stock.