Alcosta applies both quantitative and qualitative rigor to its stock selection process. Using proprietary and third-party analytics, we identify the 500 U.S. stocks with the highest risk-adjusted returns. We then apply a number of screens to measure for relative strength, to produce a target list of approximately 100 stocks for in-depth fundamental analysis.
We then subject these 100 top-performing stocks to several qualitative evaluations to determine earnings, revenue and profit margin potential. In that analysis, we seek companies with earnings that are projected to grow faster than the overall economy, ideally 15% to 30%. We then select only those stocks with the highest potential for price appreciation over at least a one-year period.
Because risk management is as critical as stock selection, we invest only in high-quality growth stocks, typically with annual revenues of at least $200 million and market caps above $2 billion. We address diversification risk by balancing portfolios with approximately 20 – 30 stocks representing a range of industries and sectors. Initial positions are limited to no more than 4% of equity.