Quality over Quantity - The Killatrades Strategy

20 Jul 2017

We evaluate 30 companies a day, but only recommend a small few that meet our simple objective:

Identify companies with the potential for a 100% share price increase in the next 12 months with limited downside risk

We are not seeking a fast paced, adrenaline pumping roller coaster of trades that go up and down. Outperforming comes via making excellent purchasing decisions based on technicals and fundamentals, then holding to realise their fair value. Overtrading and picking mediocre companies without the confidence to hold, is a way to lose money fast.

As a result, we are driven by what opportunities present themselves. We may not recommend a trade for a month, then recommend two in a week.

We actively maintain an investment portfolio which invests in these companies.

So… What are we looking for?

We are primarily seeking disruptive technology companies that are in the early stages of a rapid growth phase.

These companies are typicaly profitable and are significantly undervalued looking at the next 12 months of forecast earnings. We conduct research and financial modeling to establish our own forecasts, using that as the basis for establishing fair value. Our forecast Price Earnings Growth ratio is a key factor in our investment decision.

We have identified some common traits of these companies:

  • Offering a new product gaining rapid traction against existing players in a well established market
  • Creating a brand new market disrupting one or more sectors
  • Have a turnaround story due to a recent event (new CEO, new company direction, changing focus to a new market)

What do we avoid?

There are some sectors we don’t invest in because they’re low growth, we don’t understand them or we have philosophical reasons to avoid.

These are; real estate, financial services, defence, service / consulting based businesses, apparel, logistics, infrastructure, mining, gambling.

We occasionally invest in these sectors, but only when the company has a competitive advantage due to proprietary technology or a highly defensible online market position.

How do we do it?

On average 30 companies per day are brought to our attention via technical alerts. We conduct fundamental research on each company to establish if they’re a viable candidate for investment.

We first establish a forecast earnings for the next 12 months and an expected growth rate for the next 3 years. There are many inputs into this process:

  • Management earnings guidance (and their track record of accuracy)
  • Previous quarter’s earnings and growth rate
  • Industry trends
  • Comparison of growth, margins and earnings with competitors
  • Company and industry risks

This data is then used to establish a fair value price for the company in 12 months time, which is compared to the current price. If the price in 12 months is twice the current price and we perceive there to be limited downside risk, we issue a trade recommendation, and invest in our private portfolio.

In order to provide a fair comparison of our performance, we have complete transparency of all trades on the front page of our website. No poor performing trades have been removed, so our results speak for themselves.

I look forward to you joining us on our long-term investment journey.

Best of luck with your investments.



Portfolio Manager

Posted by Chris
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