Fundamentals – Qualitative Analysis

The qualitative analysis stage is where Sionna assesses a company broadly and deeply to judge its investment potential. The discipline of the process makes sure we’re thorough in our assessment.

We start with Sionna’s Research Questionnaire to draw out all aspects of a company. The in-depth analysis includes:

  • Reviewing finanicial statements and other publicly available information
  • Interviewing senior management
  • Arranging tours and facility visits
  • Conducting other competitive reconnaissance

Sionna examines the three major risk areas for companies:

  1. Cyclical risk: dangerous, but manageable
  2. Operational risk: avoidable, but inevitable
  3. Financial risk: the investment plague

We like cyclical and operational risks. They are often misunderstood by the market, producing mispricing and investment opportunities. Excessive financial risk, however, is not one we are willing to accept.

Examining Financial Risk

We actively seek to minimize financial risk in our portfolios by honing in on:

  • Debt-to-equity ratio plus minority interests
  • Debt repayability
  • Cash flow analysis

Meeting with Management

Annual reports are marketing documents – to get a realistic picture, we go beyond the glossy pages and meet with company management. It enables us to hear first hand about how they’re running their business on behalf of their shareholders.