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Valuation Model

The Columbine Valuation Model forecasts future alpha from an objective measure of each stock’s intrinsic value. The model’s rankings are a synthesis of five individual value-oriented factors drawing on reported and estimated earnings, book value, cash flow, and dividends.

This is a “building block” model; it is not intended to stand alone. The Valuation Model complements, but does not duplicate the characteristics of other forms of analysis; it is intended to be used as one element of a complete stock selection system.

Our design goal for this model is to maximize its ability to discriminate between attractive and un-attractive issues. This is measured as the difference in alphas generated by a model’s top (1st) and bottom (10th) deciles over the long-term time horizons of interest to institutional investors. Valuation Model alpha forecasts are predictive out as far as three years in the future.

We developed the Valuation Model in 1997 and began publishing Valuation Model rankings from live data in 1998.

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