Mutual Funds

Fact-driven, Forecast-free

The stocks in Transparent Value Funds portfolios are selected based on the answer to a simple question:

Can management deliver the Required Business Performance^® to support the stock price?

Rather than guessing how a company will perform in the future, our stock selection process focuses on determining how a company must perform in the future. We believe that those companies that deliver the performance to support the price of their stock are rewarded in the marketplace. More importantly, those companies that are not likely to deliver the performance to support the stock price is a result of behavioral risk a risk we seek to avoid.

Transparent Value Funds offer three series of equity mutual funds: Directional Funds, Style Funds and Dividend Funds. All funds use a Transparent Value Index.

Directional Funds – Large-cap funds with stocks filtered on the basis of beta and RBP^® Probability.
Style Funds – Large-cap funds focused on either growth or value stocks with high RBP^® Probabilities, as well as a core fund consisting of both growth and value stocks
Dividend Fund – Fund consisting large-cap and mid-cap stocks with high dividend yields.

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.