Transparent Value Management

The principals are a team of seasoned investment professionals who have previously worked together or known each other for the past ten years, successfully managing multi-billion dollar private and public equity investments. They have diverse backgrounds in investment banking, investment management, performance measurement, valuation, research, and analysis. While past performance should not be considered indicative or a guarantee of future performance, these members have had practical success with the Transparent Value investment methodology, having effectively used it to make successful investment decisions under a variety of circumstances.

After living through the dot com implosion, Enron and WorldCom collapses, mutual fund scandals of the past, and the frustration of the ongoing research conflicts, the founders of Transparent Value simply believed there had to be a better way to invest.

In 2003, the Transparent Value investment methodology was created based on the following key characteristics:

Transparency

Ease of understanding

Risk measurement

No research conflicts

Unemotional

Rules-based

Sell discipline

Strong knowledge management

There is no guarantee that the characteristics will necessarily translate into investment performance.

RBP^®

The revenue growth necessary to support the current stock price. Required Business Performance^® is used as a benchmark against which to measure management’s ability to perform in the future. It is calculated using a reverse discounted cash flow valuation model that uses the current stock price as the primary input.

RBP^® Probability

The likelihood that management will deliver the Required Business Performance^® to support the stock price. It is calculated by fitting the company’s historical revenue growth to a distribution, then finding the company’s Required Business Performance within this historical distribution.
In the hypothetical example below, the company’s RBP^® Probability, represented by green, is 35% while its Behavioral Risk Indicator, represented by red, is 65%. RBP® Probability

Behavioral Risk Indicator

The likelihood that investors’ systematic behavioral biases have caused misalignment between the stock price and management’s ability to deliver. The Behavioral Risk Indicator is designed to capture the impact that human psychology has on the subjective valuation process used by investors. It is defined as one minus the RBP^® Probability.
In the hypothetical example below, the company’s RBP^® Probability, represented by green, is 35% while its Behavioral Risk Indicator, represented by red, is 65%.

RBP^® Methodology

A system of fundamental stock analysis that uses a reverse discounted cash flow valuation model to determine what the stock’s current price implies in terms of future free cash flow and revenue (Required Business Performance^® ) as well as the calculation of the likelihood that management can deliver the Required Business Performance^® , known as RBP^® Probability.

RBP^® Platform

The Transparent Value decision support tool consisting of an interactive database containing the proprietary data produced by Transparent Value. Included are the Required Business Performance^® (RBP^® ) values, RBP^® Probabilities and Behavioral Risk Indicators for more than 2,000 global stocks, the Transparent Value mutual fund rating system providing coverage of more than 3,000 funds, and also broad market indicators.

RBP^® Snapshot

Provides updated company-specific RBP^® information based on the company's most recent quarterly financial data. The RBP^® Snapshot consists of the RBP^® probability and RBP^® values for a particular company.