How to Make the DualGrade®
HOLT Value Associate's DualGrade® scorecard is a mechanism for a simplified evaluation of recent relative performance in terms of two letter grades "A" through "E."
The first letter grade is based on HOLT's ranking of performance relative to returns generated by assets already on the balance sheet of the companies graded. The second letter grade is based on the market's expectation for future performance based on market price and investments not yet reflected in the financial statements. Just as in school, an "A" grade is excellent, "B" is good, "C" is average, "D" is poor, and "E" is at the bottom of the class, so goes the DualGrade® for a given size category. HOLT DualGrade® relies on current market prices and as a result is a tough grader. Only 20 percent within each size category achieve the highest "A" grade, only 20 percent "B" and the bottom 20 percent "E." There's always 20 percent "E's" awarded, and these should serve as a wake-up call to management that the market is disappointed with future prospects relative to other investment grade alternatives. In addition to the DualGrade® scores, key factors used in the ranking, such as current market price, current and forecast CFROI, are included. Key operating statistics, which are value drivers, are also included as benchmarks for operating performance.