Primary Research & Diligence
Independent Identification of Targets:
Most companies targeted by Red Oak have little or no research coverage. To generate ideas, Red Oak first employs a quantitative screen of companies based on earnings, cash flow and other metrics.
From a universe of over 2,000 stocks, approximately 700 meet the initial screening criteria. Red Oak further distills the prospect list, focusing on low NOPAT and free cash multiples in predictable businesses which have low sensitivity to broader economic growth and to the market.
Private Equity Style Diligence:
Red Oak spends months of diligence on investments, approaching the business as a private equity investor and owner. We employ channel checks with suppliers, customers and competitors to confirm relationships and levels of business. We visit over 30 companies a year and have never invested in a company without seeing its office, plant and management in person. Often, we are the first potential investors to visit a target company.