Investment Philosophy


Our Core Beliefs

1) Active Management over Passive 2) Identify & Focus on Signal while Ignoring Noise 3) Rigorous Rules Based Approach Grounded in Fundamentals 4) Concentrated Positions

At Gladiator Capital we believe high-conviction portfolio management will add significant value over passive and most actively-managed strategies. We assert that superior long-term performance is primarily the result of effective active management through superior stock selection rather than sector rotation.

The Gladiator investment philosophy was born out of leading edge industry research in behavioral finance. Our process capitalizes on the well-documented chronic underperformance active investment managers experience due to biases inherent in human decision making. We have identified a common set of pitfalls that are the cause of the majority of active managers’ underperformance and have designed our investment process to capitalize on these issues.

We have developed an investment strategy specifically designed to identify the root causes of the well-documented, consistent under-performance of most investment managers with respect to the broader equity markets. First we identified a common set of issues that account for the majority of active manager’s under-performance and then designed a process that sidesteps these pitfalls. Specifically, we are able overcome these pitfalls by utilizing fundamental signals in an objective manner, application of strict investing criteria, and the active avoidance of identifiable common cognitive errors such as overconfidence in our ability to predict the future. Some specific examples are listed below along with how they are taken into account by our process.

Common Error How It Manifests Gladiator’s Response
Anchoring Basing price expectations on past trading history. Thinking a stock will come back because it’s been there before. We take a fresh look every period unencumbered by price history.
Loss Aversion If I can just get back to even I’ll sell. Paper losses hurt less than realized losses. The objective signals inherent in our process remove emotional pain from decision
Overconfidence Our ability to predict the future isn’t as good as we think.   The Gladiator investment process does not involve attempted predictions.
Herding Investors & analysts exhibit herd behavior. Too much career risk going in a different direction. “You don’t get fired for owning XXX.” All potential holdings are held to same criteria regardless of their popularity.
Representativeness Just because the CEO is polished and says the right things doesn’t mean it’s a good stock. What are his actions? We focus on specific actions taken such as the payment of dividends.
Availability Cascade A nonevent that is inflated by the media and the public until it completely fills the conversation. Use of a clearly defined strategy keeps us focused only on relevant information.

Our methodology starts by screening exclusively on components of the S&P 500. From there, Gladiator selects only companies which pay reasonable dividends, have attractive valuation ratios, display superior top and bottom line growth, and positively utilize leverage. We find these stocks, with combination of superior sustainable growth and attractive valuations, are the ones with the highest likelihood of delivering market-beating returns.

Our unique approach to investing results in a disciplined, high-conviction, long-only equity portfolio and is the heart of our firm’s flagship product, The Gladiator Fund.

We focus on key information signals provided by three separate sources: company management, research analysts, & debt providers. These signals are weighed in light of the career critical actions taken to indicate the party's true opinions.

While the fundamental signals from each of these sources provides excellent insight, the real power is in their interplay. By combining these signals we get multiple points of analysis on the key fundamental information that drives company and, in turn, stock performance.

Combining all the critical fundamental information yields a small pool of potential holdings ranging from roughly five to fifteen stocks. It is from this pool that The Gladiator Fund selects its holdings.