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The Financial Framework of FireRock Research

With over 8000 hedge funds in operation in the United States and an untold number of funds managed globally, the competition for funds under management is fierce.  FireRock Research has met this challenge by creating the FireRock Element® for financial professionals and independent investors alike.  FireRock Research offers accurate, high-quality, quantitative analysis of over 7,000 Domstic US and Canadian stocks.  Our objective is “Capital Appreciation through Capital Preservation.” 

The FireRock Element® represents an innovative system of quantitative analysis, based on analysis of the investment strategies of Warren Buffett, Philip Fisher, Benjamin Graham, and George Michaelis.  The FireRock Element® is the culmination of over 20 years of market research, coupled with development of ten leading edge financial ratios. The Element™ results from roughly 300 calculations which measure growth, value, and management performance on Main Street. Peter Psaras, our Director of Investment Research, is the creator of both FireRock Research and the FireRock Element®.  Mr. Psaras’ extensive career in the investment industry has spanned three decades.  Through his intense analysis of leading investors, Mr. Psaras developed 10 original financial ratios which are a combination of the investment strategies of Mr. Buffett, Mr. Graham, and Mr. Fisher. 

Once all 10 financial ratios were in place, they had to be proved.  An intensive case study and proof of concept pilot by FireRock Research showed the FireRock Element® (the final product of all 10 financial ratios) consistently outperformed the S&P 500 Index.  Most of the work that is done here at FireRock Research is based on free cash flow.  In order to validate our own ratios we wanted to see how a backtest of Free Cash Flow would turn out if it were done over a fifty-eight year period.  Accordingly, we undertook the backtest of “Free Cash Flow” from 1950 to June 2007, and compared its performance on a yearly basis to that of the thirty stocks that make up the Dow Jones Industrial Average (DJIA). Starting on January 1st of each year from 1950 to 2007 inclusive, we determined which companies in the DJIA would have been purchased using stocks that came in at or under 15 times price to Free Cash Flow Per Share. 

We then purchased these companies and held them for exactly one year, selling them on December 31st of the same year.  We repeated this process for all subsequent years, for a total of fifty-eight years.  The results confirm the validity of our methods and show conclusively that a Free Cash Flow based strategy not only works, but works very well. See the Free Cash Flow results here Mr. Psaras has an accomplished history of working alongside investment professionals and private investors as they strive to optimize their investments.  The FireRock Element® is the logical progression of a career aimed at assisting investors and is now available to you on a subscription basis.  

Go inside the FireRock Element® to learn more.

Frequently Asked Questions, click here

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