Investment Process

Hudson Edge Investment Partners’ value driven and risk averse domestic equity investment process has been employed in its current form since 1990. The equity team screens for disciplined companies with improving cash flows selling below their discounted present value. Rigorous qualitative fundamental analysis is applied to make the final security selection. During this analysis, the equity team focuses on undervalued companies that operate from a position of competitive advantage and whose management team understands the principles of shareholder wealth creation.

Step 1


We employ quantitative screening utilizing Cash Flow Return on Investment (CFROI) data from HOLT that adjusts for varying accounting methodologies, applications, and distortions, as well as for inflation. This allows us to understand a company’s wealth creation proposition.

Step 2

Fundamental Research

The Fundamental Research is the most important part of the process. This stage allows us to identify those companies with Defensible Business Models and Superior Management Teams. We use a Proprietary Investment Template used to ensure consistency across potential holdings. Our process can be paused at any point due to a variety of reasons and saved in the Research Library.

Step 3

Fair Value Analysis

Then we conservatively project future cash flows for the company based on our fundamental research. This allows us to compare warranted equity value to what the market is currently pricing in.  If  the market is implying a significant deterioration in profitability for this high quality company, the dislocation presents an investment opportunity.

Step 4

Sell Discipline

A holding becomes a candidate for sale if valuation no longer offers the same compelling risk / reward. Other reasons include a significant change in strategy or management; or an exogenous event that causes the thesis to materially change.

Once a security has been selected for portfolio inclusion, the portfolio manager works with the head trader to initiate a buy order. The head trader reviews liquidity and best execution to ensure minimal price movement. By ensuring that every holding meets each of our strict criteria and employing a disciplined approach to valuation, these characteristics translate to the portfolio as a whole and create positively skewed risk/reward.

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