Unlike stock screening services, we don't simply screen — Stock screeners provide the flexibility to search based on multiple criteria and the power to process a large number of stocks quickly. However, screens have several important drawbacks that are eliminated under the MOI methodology. First, screens disregard qualitative criteria such as the ability and incentives of management. Second, screens often miss quantitative data situated just below the surface of "headline" GAAP numbers, including the operating performance of individual business units and non-recurring items that do not register as such under GAAP. Third, screens often suggest candidates with "fatal flaws" that become obvious after only minor due diligence. Finally, screens rarely take investors into pockets of maximum market inefficiency. The MOI approach corrects for these deficiencies, while continuing to utilize screens as an input into our idea generation process.

Unlike stock profiling services, we don't simply profile — Many investors utilize company tearsheets provided by information and aggregation services. While such profiles include pertinent and easily accessible information, they are either generated automatically by programs tapping into databases or by journalists with little or no professional investment experience. As a result, such profiles generally fail to identify key value drivers, making it virtually impossible to render informed judgment on the investment merits. Meanwhile, MOI analyzes companies squarely with a view toward ascertaining the gap between market price and intrinsic value. We also look for catalysts that may bring market price closer in line with value.

Unlike sell-side research, we don't simply evaluate stocks within their respective industries — Wall Street analysts are trained to assess competitive dynamics within specific industries, with little license to venture beyond their narrowly defined domains. Domain expertise is, of course, valuable and should be included in any investment analysis. However, investors and portfolio managers with a mandate to invest across rigid boundaries must seek out opportunity regardless of industry or sector label. MOI helps investors weigh opportunity costs and compare potential investments along financially significant features rather than simply along SIC codes. For example, in a credit crisis, the stock of a heavily indebted retailer may correlate more to the stock of a highly leveraged bank than to the stock of a fellow retailer with rock-solid financials. As a result, when evaluating investment alternatives, the risk-reward profile of the distressed retailer might be more appropriately compared to that of the distressed financial institution than to that of the fellow retailer with a deleveraged balance sheet.

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