TORLX

The Toreador Large Cap Fund: TORLX, which uses AFG’s Economic Margin Framework as part of its investment philosophy, recently crossed its three year threshold.  Toreador’s solid three year track record (Lipper Leader Raking 4 out of 5) along with their growing number of assets, has enabled them to lower management fees to .90% with the total expenses capped at 1.23%

Toreador has also just issued a new institutional share class: TORZX with total expenses capped at .98%

Investing in Large-Cap Stocks:
Rafael Resendes Interview
Wall Street Transcript

In yesterdays article we provided an update of the performance of our annual HOT STOCK LIST:

We also provided an update of the performance of the Toreador Large Cap Fund, TORLX which uses AFG’s Economic Margin Framework as part of its investment philosophy.

As you may note, both have done very well!

Today we decided to provide a Buy/Sell list to VE’s registered visitors applying some of these same investment principles: Economic Margin, Management Quality, and a company's Percent to Target (the deviation between a stock's current trading price and its current default target price according to AFG).

Below is a preview of the list which includes a Buy/Sell Recommendation on each Stock. The complete list, accessible to Value Expectations registered users, contains around 500 Stocks.

Source: The Applied FInance Group

To download the complete list click here.

US Small-Cap Stocks Close Lower As Banks Decline
By Kejal Vyas
Of DOW JONES NEWSWIRES

Rafael Resendes, co-founder of The Applied Finance Group and co-manager of the Toreador Large Cap Fund says "I think the overwhelming theme we've seen in the market is, the more Washington talks, the more the market sells off"


 Read Full Article: US Small-Cap Stocks Close Lower As Banks Decline

 

An Interview with Rafael Resendes, Managing Director at Toreador Research and Trading LLC and co-Founder of The Applied Finance Group (AFG) - Wall Street Transcript

Rafael Resendes, Portfolio Manager of the Toreador Large Cap Fund: TORLX

TWST: Would you start with an overview of Toreador and your investment philosophy there?

Mr. Resendes: The first concept that drives our thinking is that we are a sector-neutral fund; we’re not looking to make sector bets and so we stay invested in proportion to each major sector’s weight in the S&P 500. We are a large cap fund, so we purchase predominantly stocks that are in the S&P 500 or Russell 1000. We will drop down to stocks with market caps as low as $5 billion sometimes, if there are some large stocks that are falling that we believe are attractive, but predominantly, we are in the upper mega-cap range with our stock selection process. Therefore what we believe sets us apart from other fund managers is our stock selection process.

We really try to focus on four major drivers behind any stock that we look at. The first is understanding a firm’s earnings quality; in other words, GAAP accounting metrics and procedures result in a fair amount of latitude in the way companies can report their earnings and prepare their books, and we want to understand the quality of those earnings before we buy them. For example, companies may push their product out to their end customers and “book” a sale, without collecting any cash from the transaction. If this happens enough, we will see accounts receivables rise faster than collected cash, and indicate a potential problem in the future. Therefore, we rank all the companies we follow on a metric we created that determines the quality of a company’s reported earnings. We do not consider firms with low earnings quality unless we understand the reason and believe it is short term in nature.

The second factor we evaluate is a firm’s economic earnings,rather than its GAAP accounting earnings. There are a number of issues that prevent reported earnings from being a true proxy for a firm’s economic performance, so we take the time to fix those issues and put all firms on a level playing field to evaluate their performance. There are examples, such as the use of R&D for instance — in the technology sector, technology companies according to GAAP must immediately expense their R&D investments. equipment. We don’t expect manufacturing firms to recoup the cost of a new machine in the year they make the purchase, and companies investing in R&D do not expect to recoup the entire investment the year they make the expenditure. Therefore the R&D expenditure needs to be reversed from the income statement, capitalized on the balance sheet, and depreciated over time — similar to physical piece of equipment. As the knowledge economy continues to grow such adjustments become more and more important. We make this adjustment for every firm in our investable universe.

Another adjustment we make is looking at off balance sheet assets and liabilities, such as the use of operating leases, which is particularly important when analyzing retail companies. For these firms,

View Complete Interview Here