The Channer Value is an investment philosophy pioneered by Christopher S. Channer, and is based upon the belief that conventional equity security analysis is deeply insufficient, and fails to understand that there is no substitution for buying the very best, when its acquisition price is rationally favorable. Determining what is “the very best”, is at the heart of The Channer Value. Unlike conventional analysis, which involves in-depth financial investigation, examination, and the integration of that research activity to the “story” of a given public security, Channer believes that a “graphic display” of the ten-year financial growth progressions tells the investor in an instant snapshot, whether a company has superior “financial character”, and whether that security is worthy of the consideration of an investor’s time, and an investor’s money.
Companies who exhibit undisturbed progressions in their key financial results, including and most importantly earnings per share, are deemed by Channer to have “perfect picture” progressions. Given all the things that can cause a company to disappoint investors during a ten-year period, including economic cycles, very few companies live up to the Channer standard; generally less that one percent of the well-established.
The Channer Value says the “story” of a company, or it’s industry, comes late in the analysis, never first. Once an investor is attracted to the “story”, objectivity is compromised. The story may produce enthusiasm, but is generally not a relevant component compared to measurable long-term investment performance, or the lack of it.
The Channer Value essentially turns conventional Wall Street Analysis on its head in terms of its selectivity standard. Historically, only about one percent of the securities covered by the Wall Street research community have been rated a sell. This strongly suggests that all those remaining (99%), are worthy of buying or holding. Channer maintains that this history is the self-evident proof that these pools of security analysts contribute little if any value in the selectivity processes, and therefore it is of little, or even negative value, in portfolio management.
The application of The Channer Value is found in the acronym originated by Channer known as E.G.A.R.P. (Exceptional Growth at a Rational Price). E.G.A.R.P. is an extension of the GARP concept (Growth at a Reasonable Price). The addition of the ‘E’, meaning the growth component of a company must be exceptional, and is characterized by superior ten-year financial growth progressions, and not by quarterly earnings reports. Finally, Channer advocates the use of complex price evaluation models to determine rational, (not reasonable) price entry points for equity securities, as the criteria of “reasonable” is highly subjective, by comparison. Price models are also used for possible exit points and portfolio rebalancing disciplines.