MacIver’s rules for successful investing:

  • Investing looks easy, especially in the late stages of a bull market. It isn’t.
  • He (or she) who is liquid at the bottom of a bear market rules.
  • He (or she) who borrows money to expand at the top of a bull market fails
  • The higher the market goes, the more inexperienced, overconfident investors dominate. The cautious have sold; there are fewer sellers to meet the increasing demand. This is temporary.
  • Cycles are caused by the expansion and contraction of debt, which is another way of saying that cycles are caused by greed and fear.
  • To succeed, in the long term, investors need a risk management plan.

Investors in public companies sometimes lose sight of the fact that they are investing in businesses. Stock market values are affected by a variety of factors, both predictable and unpredictable, both short and long term. Short term factors include emotion, liquidity and interest rates. Over the long term, the single most important factor affecting both risk and return, by far, is business quality. That’s where we focus. We assess investment risk as determined by business quality. The investment principle that underlies all of our research:

Investments in companies with growing sales, improving margins and declining (or no) debt outperform, over time, companies with weak sales, declining margins and increasing debt.

We conduct independent portfolio risk assessments for family offices and professional investors. Our work relies primarily on standard credit analysis techniques. We apply, on a rolling quarterly basis, hundreds of credit analysis ratios to a variety of time periods. The statistical and research background of this research:

  • Graham and Dodd’s Security Analysis.
  • Moody’s Credit Analysis Metrics.
  • The E. I. du Pont de Nemours and Company return on equity model as used by Alfred Sloan in his management of General Motors. Visit here for more.
  • Research by Joseph D. Piotroski (developer of the Piotroski Score), professor at The University of Chicago Graduate School of Business here.
  • Research on improvements to the Piotroski F-Score here.
  • A study by Robert Novy-Marx, professor of Business Administration at the Simon Graduate School of Business at the University of Rochester, New York, here
  • Northern Trust’s Quality Company Scoring System here.
  • The Altman Z Score
  • Michael Porter and his work on competitive strategy, for instance his book entitled Competitive Advantage.

To maximize efficiency, over a period of several years we’ve created software to assess the financial risk of companies and report to clients.

Examples of financial statement trends that form the basis of our research:

  • return on capital and their constituent components (capital turnover, margins)
  • trends in debt versus equity
  • free cash flow
  • times interest coverage
  • liquidity (inventory, receivables versus sales)
  • capital expenditures in relation to cash flow
  • growth in earnings, operating profit, gross profit, revenue and free cash flow

The primary emphasis of this research is on rolling twelve month analysis, but consideration is also given to latest quarter versus prior year quarter, and last five years versus prior five years.

For more on the techniques we employ, visit Methodology.

We report quarterly to clients. Each report consists of:

  • A summary analysis in Excel spreadsheet form of companies in client portfolios listed in order of financial statement risk.
  • A comparison of client portfolio financial statement risk versus that of the overall market (6,200 companies)
  • Six page reports on each company in client portfolios detailing financial statement trends and price versus estimated intrinsic value. Visit Sample Reports for examples.


  • Our quarterly custom Balance Sheet Risk Reports are available for $100 per company annually. Visit Pricing for more detail.

The role of a Devil’s Advocate

  • Our role is to identify and quantify risk in client portfolios. Our conclusions often differ from those of our clients. Rather than be agreeable, our objective is to be helpful, useful.


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