Our Investment Process
The investment model at U.S. Global Investors isn’t a single strategy or screen to select stocks, but instead we piece together a broad range of inputs to form an intricate mosaic. Everyone in the marketplace has access to the same data—it’s how quickly and how well you use it that determines your success. Our investment mosaic enables our team to analyze and adapt to ever-changing markets around the globe.
Our top-down analysis identifies macro themes by evaluating global economic trends, monitoring government policy changes, socioeconomic trends, currencies and other items.
Country, Sector and Currency Trends
We travel the world to get the firsthand knowledge essential to our risk management framework. We monitor macro factors such as geopolitical developments and changing government policies, and micro factors such as the strategy and execution of company management.
We evaluate stock and sector performance on a best-to-worst basis for each week, month and quarter. This allows us to identify critical drivers that could lead to outperformance or underperformance over various time periods.
We measure and compare companies using a range of metrics, including earnings-per-share growth, revenue growth and return on equity. This allows us to evaluate a company’s current and future growth potential.
Fundamental Bottom-Up Analysis
Stock-picking and cash management form the basis of effective portfolio management. Our stock selection process focuses on finding the best stocks to own based on a company’s return on capital, quality of management and other critical drivers.
Stocks that appear undervalued on an absolute basis may be expensive when compared to their peers. A stock’s true value can only be determined through evaluation of multiple factors. We use a matrix of valuation models that includes price-to-earnings ratio, price-to-book ratio and enterprise value/earnings before interest, taxes, depreciation and amortization (EV/EBITDA).
Quantitative Risk Management
We use oscillators and other proprietary models to monitor how each country, sector and currency performs over a given time period. In general, an asset that has moved more than one standard deviation up or down over a short period of time will likely revert back toward its mean.
Each investment trend has a discernible lifespan that guides how we invest in it. A destructive hurricane season is a short-term theme whose portfolio impact can generally be measured in months. The global infrastructure build-out is an example of a long-term theme that will have multiple bull and bear cycles over a number of years.
Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility.