Our Process

For more than 25 years, institutional clients and investors have relied on DRZ’s
time-tested value investment methodology.
We believe:

Undervalued stocks with a dividend yield and a fundamental catalyst provide the opportunity for superior long-term total returns.

Bottom-up stock selection is the key component to performance.

Research moves up from company to industry and economy to confirm improving prospects.

Funds should be moved into stocks which have better risk/reward prospects.

The Importance
of Dividends
Price Return (Ex-Dividends) Total Return Difference = Dividends
Russell 1000 Value Index (1991) 914% 2309% 60%
Russell 2000 Value Index (1994) 745% 1520% 51%
MSCI Emerging Markets Index (1988) 1024% 2641% 61%

Across each of our strategies, DRZ utilizes three equally balanced factors:

01

Dividend Yield

Dividend yield provides a meaningful portion of the market’s total return and offers concrete evidence of real earnings.
We typically require at least a 1% dividend yield across all strategies. We believe the return of cash to shareholders in the form of dividends encourages capital allocation discipline.
02

Relative Valuation

We examine a stock’s long-term valuation history relative to its appropriate index, seeking to identify stocks trading at the lower end of their relative valuation range.
We focus on relative valuation measurements such as yield, price to book, price to earnings and price to cash flow.
03

Fundamental Catalysts

Through our bottom-up research coupled with decades of investment experience, we identify catalysts for change which informs our purchase or sell decision.
By combining expected dividend yield, relative valuation, and fundamental catalyst, we’re able to identify stocks that we believe have greater risk/reward prospects where the expected upside is two times greater than the downside. We establish relative price targets for stocks which meet all three criteria.
Buy
A stock is a buy candidate when it meets all three criteria for yield, valuation, and fundamental catalysts.

Yield

Identify a universe of stocks with appropriate yield requirement

Relative Valuation

Select undervalued stocks, reviewing relative valuation history of:

  • Yield
  • Price to Book
  • Price to Earnings
  • Price to Cash Flow

Fundamental Catalyst

Fundamental analysis identifies improving prospects

Decision 

  • Establish relative price targets for stocks which meet all three criteria
  • Buy stocks with expected upside two times the downside
Sell
A stock is a sell candidate if one of the three criteria is violated.

Yield

Yield on stock falls below the acceptable yield parameter limit

Relative Valuation

Consider a sale if any of the following are met:

  • Relative price target has been achieved
  • Expected upside is now half the downside
  • There are other stocks in our buy process which have better risk/reward prospects

Fundamental Catalyst

  • The company is not performing as expected
  • Review fundamentals and valuation target
  • The sector or country begins to look less favorable

Decision

If any of the three criteria for yield, relative valuation and fundamental catalysts aren’t met, the stock is a candidate for sale.

View our strategies