Our Investment Process

The investments of the Fund are managed using a unique approach by the Investment Manager to identify shares with long term performance potential.

Initially, Trident uses a “Top Down Thematic” investment approach where we identify economic, social, industrial, demographic and technological trends (“themes”), which we believe will enable out performance by investing in sectors and industries in the early stages of investor interest.

Once these trends have been identified through research and expertise, Trident uses a long term “bottom-up” approach to assess individual equities within the identified “investment themes”. Bottom up stock picking involves assessing the fundamentals of a business as how a particular company will perform over a given period.

Trident believes that equity markets are inefficient and, therefore, offer excellent investment opportunities over time. The inefficiencies arise due to excesses in investor emotion, a focus on short term investment horizons and a lack of focus on one of the most important aspects of a company’s financial health – its profit and loss statement, balance sheet and statements of cash flow.

Trident aims to buy stocks, which we believe are under-priced and expect to grow at rates greater than the market. Our strategy is to favour well-managed, good value companies that have significant growth opportunities through their comparative advantage in sectors we believe are favourably suited to the prevailing medium term economic climate.

This comparative advantage can be via a combination of a better product or service, a more efficient organisational model, a favourable niche or a commanding leadership position within their industry. In our view, a good business requires good products and services and good execution.

One of the most important aspects of investing is objectivity. It is therefore, possible to benefit from changes in market inefficiencies by focusing on logical, ordered and objective investment decisions based on known facts. The key to identifying these investment opportunities lies in our extensive insight and analysis of companies and the industries in which they operate.

Selection Process

Our selection process, the proprietary Trident Investment Selection System, applies a series of fundamental and subjective criteria to each potential investment prior to the investment being added to the portfolio.

For example, we are examining companies that have the following criterion:

1. Positive Earnings Revisions. I like to see stocks that have had their earnings estimates increased by Wall Street analysts. This usually tips us off to a stock that’s about to “beat earnings.”

2. Positive Earnings Surprises. Speaking of beating earnings, I also look to see if a stock has been able to beat its earnings estimates, and by how much. This is an important number to watch because it often tells me about a stock that Wall Street isn’t paying much attention to or doesn’t yet “get.”

3. Increasing Sales. I also like to see a company that can grow its sales over time. Why? Because it’s one number that is hard to fake. My background is in accounting, and I’ve always made sure to steer away from companies that use questionable accounting practices. Sales growth is a solid indicator.

4. Expanding Operating Margins. This simply tells me if earnings are growing faster than sales. A company that’s able to expand its operating margins is usually a company that has a dominant position in its industry. This company can raise prices without seeing a drop-off in sales. That’s a nice place to be.

5. Free Cash Flow. This tells me how much money a company has left over after paying for the costs of its business. Having a strong cash flow is important because it allows a company to invest more resources in growing its business.

6. Earnings Growth. This is at the heart of all good financial analysis, and I rely on it as well. As long as any company is able to grow its earnings consistently, its stock will do well.

7. Positive Earnings Momentum. It’s not enough for me to see a company's earnings growth—I also want to see its rate of growth increase.

8. Return on Equity, or ROE. This is the gold standard. ROE tells me how efficiently a company is managing its resources. I can’t interview every senior manager at a company, so I like to think of ROE as a report card for management.

9. Price Appreciation Potential. We examine how under valued a stock is and look at the potential price appreciation based on it’s present events, industry valuations and Price to Book (PB Ratio) valuations. We target companies that have “above the norm” potential to gain in price short to medium term.

In addition, we examine:

·  Return on Assets

·  Industry Trends

·  Industry Strength

·  Management Skill and Stability

·  "Insider" and management ownership of shares

·  Institutional Support

·  Business Model and Products

·  The Company's Position in the market and competitors

·  Price to Earnings Ratio

·  Sales Growth

·  Earnings Surprises

·  Debt

·  Balance Sheet Health

·  Recent Acquisitions

·  Export Markets

·  Recent Share Price Movement

·  Plus a few other "barometers"

Once this is all done, and we are convinced that we can achieve out performance over 2-5 years, will we invest.