Noroian Capital Management's primary
responsibility is to seek capital appreciation while preserving
is a long-term proposition. Superior investment results accrue
to those who make a commitment of at least three to five years
or longer. We believe investment success results from investing
in the common stock of high-quality companies whose true economic
performance is improving. Experience has shown us that a company's
performance is not always reflected in its stock price. By investing
in companies whose stock price inadequately reflects the exceptional
economic performance of these companies, superior long-term investment
performance is obtainable.
Preserving assets while investing in the equity markets is based
on two principles. First, maintaining a disciplined investment
approach is necessary. Second, we hold cash when our investment
disciplines do not identify any attractive investment candidates.
This happens only once or twice during every economic cycle, but
can be very material to investment success.
analyze a company's performance by focusing on its cash flow.
Earnings can be managed, but cash flow is the life blood of a
company. We begin by relating the cash flow to the assets from
which it was generated, creating the cash flow return on assets
(CFROA). If assets are managed properly, financed and grown appropriately,
then cash flow returns will be realized, and the owners (shareholders)
will be rewarded. Our stock selection process has three main components.
Stable or improving CFROA
- Appropriate capital expenditures
- Strategic advantages
value range appreciably higher than current stock price
to own a stock
-When to sell
a universe of several thousand companies, we narrow our focus
with our CFROA analysis. Then we determine if the stock price
adequately reflects underlying corporate performance. If a discrepancy
exists between the company's performance and its stock price,
we try to understand why. Researching the company and its industry,
we search for any strategic advantage that will provide the impetus
for the stock price to reflect the real corporate performance.
we study the stock price history to understand investors' perceptions
of the company. At this point, we determine when is the most opportune
time to own the stock. We have found that stock prices of great
companies have remained below their fair value range for long
periods of time. An analysis of accumulation, distribution, relative
strength, money flows, and price patterns can provide insight
as to the appropriate time to buy.
to our buy disciplines, our sell disciplines are centered around
price targets, CFROA analysis, and strategic advantages. In addition,
a stock may be sold when it violates predetermined price support
levels. Price targets are established before a stock is purchased
and may change due to competition and an evolving economy. When
the risk/reward profile of a stock in the equity portfolio becomes
less favorable, it is sold.