Palladian Research launches Fundalytics

New York, NY, August 11, 2003 - Palladian Research, LLC, an independent equity research firm, announced today the launch of Fundalytics. Fundalytics is a monthly publication that provides the most accurate and comprehensive fundamental analysis of the S&P 500 index's constituent stocks. The aim is to provide not only historical trend lines for the past five years for such metrics as revenue and cash-flow growth but also a unique ranking of the 30 industry sectors into which the index has been divided. This ranking system helps steer portfolio managers toward sectors that are accelerating yet remain reasonably valued and, even more important, help them avoid sectors that are either overpriced or fundamentally deteriorating. Back testing of more than a dozen factors to determine predictive capabilities results in a proprietary weighted algorithm that combines elements of the income statement, balance sheet, cash-flow statement and valuation.

The first issue is entitled "A Fish Finder in a Sea of Stocks", and as the inaugural issue of Fundalytics, explains the basics of how the report series can help institutional investors improve their funds' returns. "We have constructed a mathematical model that improves portfolio performance at the sector level when measured in six-month increments, relying on a carefully organized blend of growth factors, return metrics and valuation data.," says Fundalytics author, Jim Poyner. Poyner, a longtime quant jock and earnings quality hound throughout his 20-year Wall Street career, further points out that "Fundalytics ultimately a statement about the earnings quality and the efficiency of a company's business model... The emphasis is not just on growth in revenue and operating income but also cash flow from operations." Based on March quarter data, the latest quarter for which a complete set of financial data is available, Fundalytics recommends investing in the energy, consumer durables and health services sectors among others

The Fundalytics model has been backtested for five years in order to ensure that it works in different market cycles. During this time, it has beaten the market in 17 out of 20 periods. Of particular note is the fact that Fundalytics' outperformance relative to the S&P 500 averaged 840 basis points, while its underperformance averaged 132 basis points. Fundalytics is thus likely to help fund managers outperform solidly most of the time, and in the periods it doesn’t, investors are unlikely to significantly underperform.

Melissa Eisenstat, President of Palladian Research, said, "We are excited about the addition of Fundalytics to the Palladian Research product portfolio. Drawing conclusions about how financial metrics affect different sectors and how changes in a financial metric in one sector can affect to stock performance in another is great example of how Palladian's research helps portfolio managers to connect the dots of the myriad of data they have."

About Palladian Research
Palladian Research provides institutional money managers with stock advice primarily on large- and mid-cap US companies by identifying trends and investment opportunities that span what are often considered disparate sectors. Palladian analysts identify trends in different sectors, be they industries like technology, healthcare, financial services or energy; or investment benchmarks like the S&P 500. They identify the drivers of a set of stocks within a particular sector, and make long and/or short calls accordingly. Stock recommendations are included in concise monthly reports.

Palladian currently publishes three separate, monthly reports and has 35 institutional clients representing a range of investment styles including mutual funds and hedge funds.

About James D. Poyner
The author of Fundalytics, James D. Poyner, has spent 20 years on Wall Street primarily as a sell-side technology analyst covering a variety of tech sectors from semiconductor to software to hardware at firms that include CIBC World Markets, Dain Rauscher and C.E. Unterberg Towbin. He is a five-time member of the Wall Street Journal's All-Star Stock Picking team, including 1997 when he was chosen the top stock picker for all industries. Before his Wall Street career, Jim was a reporter for five years for the Dallas Morning News and the Dallas/Fort Worth Business Journal after receiving a B.A. in journalism from the University of North Texas.

Contact
Melissa Eisenstat
President
Palladian Research, LLC
(212) 798-1476
m.eisenstat@palladianresearch.com