At Wolverton Securities we outsource research on large capital markets to Strategic Analysis Corporation (SAC), and for the past four years, the relationship and results have brought consistent benefits to Wolverton’s clients and employees.

The Strategic Analysis Corporation’s approach to investment analysis is based on the Theory of Accounting Dynamics. SAC developed a practical framework for this theory, one that explains the dynamic relationship between balance sheet structure, earnings and stock market valuation. SAC refers to this process as Structural Valuation Analysis (SVA) and applies it to equity portfolio management, corporate investment planning and credit evaluation.

The approach closely integrates the balance sheet, earnings and market pricing into a unified system of value generation. Its major finding is that stock prices are constrained within set boundary conditions or structural prices. Understanding structural prices and the conditions that limit the movements of stock prices makes it far easier for the analyst and portfolio manager to make sound purchase and sale decisions by following the traditional use of standard financial analysis.

Strategic Analysis Corporation investigates a company’s balance sheet structure to determine its stability, which in turn forms the basis for determining credit strength. Based on the balance sheet, the equations hold - regardless of the economic environment, interest rate levels, accounting conventions or source country. Using structural analysis, SAC then determines the key breakpoints, to provide valuable trading information and to assess a company’s corporate fundamentals. Finally, the balance sheet and the corporate earnings are combined for valuation. This is where differences are revealed and trades based on market inefficiencies hold out the prospect of substantial gains.