Renaissance's investment process involves three steps:
Step 1: Quality, Liquidity & GAAP Conformity
Our international equity selection process begins with 2,300 American Depository Receipts and U.S.-listed shares of foreign corporations. From that universe we then select only those companies that have at least $500,000 per day in trading activity, financial statements that reconcile to U.S. accounting standards (GAAP) and are traded on the NYSE, Amex or NASDAQ exchanges. This initial screening process eliminates the illiquid, high-risk names (such as private-placement ADRs and Pink Sheet issues).
Step 2: Multi-Dimensional Scoring
Typically, we are then left with approximately 500 companies that are given further consideration. These companies are subjected to a rigorous quantitative scoring process whereby each is analyzed and ranked on the basis of historical growth, future earnings expectations and valuation. The end result is a composite ranking that helps direct our qualitative analysis. Only the top 20% of the companies in this ranking are considered eligible for purchase and further review.
Step 3: Qualitative Review
We then supplement our quantitative analysis with an in-depth qualitative review. Each company ranked in the top 20% of our universe is evaluated by considering issues such as company fundamentals, business environment and momentum, quality of management, business strategy and any macro/political issues unique to a company’s home country or primary business market. We utilize outside research sources (both U.S. and international) as well as our own analysis in this effort. Only the 50 most attractive companies on the basis of this review are then selected for client portfolios. Our scoring process also serves as a very effective sell discipline. Any issue falling below the top 40% on the basis of our qualitative scoring process is considered a sell candidate. We will then sell that stock in favor of a more attractively (higher) ranked company. |
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