Act Two Investors believes that low-valuation investing works.  Therefore, Act Two typically invests in equities, mutual funds and ETFs with one or more of the following characteristics:  

 

1. Price/earnings, price/cash flow or price/book value ratios lower than the market

2. Price/earnings, price/cash flow or price/book value ratios lower than its industry group

3. Price/earnings, price/cash flow or price/book value ratios lower than companies with similar prospects and financial characteristics

4. Price/earnings, price/cash flow or price/book value ratios lower than usual relative to the company’s own history

5. Price/earnings, price/cash flow or price/book value ratios lower than usual relative to the market

6. Asset value significantly above the current stock price

 

For individual stock selection, Act Two Investors employs a variation of low valuation investing developed and refined by Jeffrey Scharf.  Act Two's in-house statistical screen seeks to identify stocks with at least one of the characteristics above and 30-40% upside potential over the ensuing 18-24 months.  The upside potential should exceed the downside risk and the stock should have a greater chance of achieving the upside than the downside.

 

Once a stock is identified by the screen, fundamental qualitative analysis is applied to confirm its suitability as an investment.