The Acquirer’s Index

A Long/Short Deep Value Index

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About The Acquirer’s Index

The Acquirer’s Index identifies undervalued and overvalued stocks using The Acquirer’s Multiple®.

The Index is composed of the 30 most undervalued, fundamentally strong stocks and 30 short positions of the most overvalued, fundamentally weak stocks listed in the US.

The Index is constructed with a 100% net equity exposure (130% long, 30% short). Constituent stocks are selected from the largest 25% of all stocks by number, or largest 90% by market cap (equivalent to a market cap greater than about $2.5 billion).

How it works

Step 1.

The Index identifies potentially overvalued and undervalued stocks using The Acquirer’s Multiple®.

The initial universe of stocks is valued holistically—assets, earnings, and cash flows are examined—to understand the economic reality of each stock. Each stock is ranked on the basis of such valuation.

Potential components are further evaluated using statistical measures of fraud, earnings manipulation, and financial distress.

Step 2.

Each potential long component is examined for a margin of safety in three ways:

(a) a wide discount to a conservative valuation,

(b) a strong, liquid balance sheet, and

(c) a robust business capable of generating free cash flows.

Each potential short component is examined to identify:

(a) a large premium to an optimistic valuation,

(b) a weak, distressed balance sheet, and

(c) a deteriorating business and stock price.

Step 3.

Finally, a forensic-accounting due diligence review of each of the remaining potential components’ financial statements, particularly the notes and management’s discussion and analysis, is undertaken.

The Index is formed from the components passing each stage. Each undervalued position will be weighted to about 4.3% of the Index value and each overvalued position will be shorted to about 1% of the Index value.

The Index is reconstituted and rebalanced quarterly.

The Acquirer’s Multiple®

How to invest

Learn more about products that track the Index.

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