ROTA/ROME®
We believe that ROTA/ROME® is: Logical. Simple. Intuitive. Actionable.
ROTA/ROME® is Cognios' proprietary quantitative, value-based stock selection and portfolio construction methodology. It serves as Cognios' Core Investment Philosophy and underpins everything we do.
ROTA = Return on Total Assets
ROTA = Return on Total Assets
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Un-levered proprietary metric of a company’s profits divided by total assets
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Cognios' Core Philosophy is that ROTA quantifies the attractiveness of a business relative to other investment alternatives
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By generating more cash flow relative to their assets as compared to lower ROTA companies, high ROTA businesses tend to have:
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More cash to reinvest for growth
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Less need to raise external capital (i.e. raise debt & sell equity)
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A greater ability to pay dividends & buyback shares
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Which Cognios believes over time can lead to higher returns to shareholders
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"ROTA Quantifies the Attractiveness of a Business"
ROME = Return on Market Value of Equity
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Levered proprietary metric of a company’s profits divided by its current stock price
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Essentially "cash flow yield"
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Cognios' Core Philosophy is that ROME is a key measure of how expensive or inexpensive a stock is at any given point in time
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Cognios believes that in general buying a company's stock when it happens to be cheaper relative to other investment opportunities can lead to higher returns to shareholders than buying a company's stock when it happens to be expensive relative to other investment opportunities.