Investment Process
YCM developed and employs a scientific approach to fundamental research and portfolio risk management designed to enhance success and consistancy in the achievement of our investment objectives.
YCM’s proprietary risk models automate market driven buy and sell decisions so that we can focus investment resources on our core competency, fundamental research, which drives our investment performance.
Yorkville searches across the capital structure and around the globe to identify investment opportunities with above-average return and below and average risk characteristics.
100 Years of Investing
Yorkville's investment team has over 100 years of investing experience. We have lived through many market cycles and witnessed 'Black Swan' events. Over the years, we have invested in thousands of companies operating in virtually every industry. This cumulative body of knowledge forms the foundation of our investment process.
Investment Pipeline
YCM's Investment Pipeline model tracks hundreds of companies on which we have conducted fundamental research. It monitors in real time the price movements of these stocks waiting patiently for the stock price to hit our predetermined entry point. It is our belief that the price paid for an asset is the greatest determinant of investment performance.
Investment Screens
YCM has developed smart screens that harness our collective investment experience to identify investment opportunities across industries and around the globe that meet or exceed our exacting standards.
Investment Roundtable
Yorkville Capital's personnel have developed a robust network of industry and investment leaders during their respective careers. We capitalize on these connections by hosting a weekly Investment Roundtable to share investment ideas with fellow professionals.
Global Investment Network
We have built a global network of regional broker-dealers that literally never sleeps. These regional brokers supply Yorkville with local investment ideas and in-depth market knowledge and keep us apprised of breaking economic news and current political events.
Generation
Yorkville Capital is a research organization. Fundamental research is our core-competency. Independent and objective research drives our investment results.
Financial Analysis
The first stage of Yorkville's research process is an in-depth analysis of the company's historical financial statements. We analyze a company's income statements, balance sheets and cash flow statements for the past four years and four quarters. This process allows us to determine the financial health of a company and the direction it is taking.
YCM has developed financial models that pull the raw financial data from a company’s regulatory filings, analyze it, and present it ina user-friendly fashion that enables us to efficiently review and identify opportunities or weaknesses.
Business Model
The second stage of our research process involves gaining a CEOs understanding of a company's business model by analyzing the drivers of revenue and expenses. Revenues are broken out by product line and geography and the largest and fastest-growing components of a company's revenue stream are identified. These are the future drivers of growth. In a similar fashion, we conduct a detailed analysis of a company's cost structure, identifying its largest and fastest-growing expenses. Yorkville's in-depth understanding of a company's business model enables us to cut through the market noise and stay focused on the company's fundamental business drivers.
Competitive Advantage
In the third stage of YCM's research process, we identify a company's competitive advantage. We talk to industry players, research analysts and management, and analyze major competitors, customers, and the market to identify a company's strengths, weaknesses, opportunities, and threats. Yorkville's objective is to invest in companies that have a robust business model protected by a defensible "moat". This gives us greater confidence in earnings and cash flow visibility and sustainability.
Financial Modeling
The fourth stage of our research process is to develop a detailed financial model. We run various scenarios manipulating a company's primary drivers to determine revenue, margin, cash flow, and earnings sensitivity to each. We use financial modeling to estimate a company's future revenue, cash flow, and earnings potential.
Valuation
The fifth stage of Yorkville's research process is valuing a company - that is, determining its intrinsic value. We use a number of valuation techniques to help us arrive at a fair valuation: discounted cash flow, relative valuations, take-out valuations, sum-of-the-parts valuations, break-up value and multiple valuations. These tools help us to determine a fair price to pay for a company. We invest in companies that meet or exceed norms in all four stages of our analysis and are trading below intrinsic value.
Investment Decision
The findings and analysis of Yorkville's five stage investment process are summarized in a research report , whereupon an investment decision is made. New ideas are then vetted through Yorkville's Investment Committee designed to strengthen the investment process by pooling our collective knowledge and identify the risks of an investment opportunity. The ultimate buy or sell decision is solely the responsibility of the investment professional.
Yorkville's asset allocation strategies are designed to limit portfolio volatility through structural diversification.
Risk Guidelines
Risk guidelines are in place for each of Yorkville's investment strategies clearly articulating the risk profile of that strategy. The guidelines establish acceptable exposures across countries, sectors, industries and individual positions and place limitations on the risks that can be assumed while pursuing investment performance. They also establish minimum levels of diversification. Yorkville's risk guidelines are designed to reduce the volatility of our strategies.
Risk Silos
Using a proprietory risk management model, Yorkville measures, monitors and manages risk at the portfolio level across seven risk silos, enforcing the risk guidelines described above. To ensure more objective implementation the monitoring of risk is separated from the investment process. We also report the risk profile of our products across the seven risk silos so that our investors can monitor our compliance with the guidelines.
Allocation Strategies
Yorkville's risk management strategies are designed to preserve capital through active risk management. Investment performance is not dependent on what you make, but on what you keep.
Target & Trigger Discipline
Yorkville's Target and Trigger Model automates sell decisions. The model tracks, in real time, the individual investments in our strategies so as to detect when predetermined target prices are reached. It also establishes a trailing stop loss and monitors when this is triggered. When a target price is reached we generally sell to lock in gains: conversely, when a trigger price is reached we generally sell to stop losses and preserve capital. The monitoring of our sell discipline is separated from the investment process to ensure unbiased implementation.
Hedging Strategies
Yorkville employs hedging strategies in order to preserve capital and limit losses in turbulent markets. We strategically hedge our portfolio by shorting individual securities and tactically hedge our portfolios primarily through the use of Exchange Traded Funds (ETFs). We purchase puts to insure the portfolio against negative market moves and utilize covered calls to increase the portfolio's income.
Management Strategies
