At Unit Economics, we  bring a unique proposition to independent research.  We combine  a  
fundamentally-oriented  'Unit  Economics' approach to  modeling  and  forecasting  company
financials  with  a  ‘pay  or performance’ business  model.   The result adds  weight  to share
prices and investor sentiment in our decision-making process.

Identifying  macro and  thematic  trends is  crucial to  formulating our  investment ideas.  We
publish  research  reports  on our major themes and trends and then we set out to find stock
ideas, both long and short, that bring alpha to our thesis.

We  generate our  stock ideas from  stock  screens,  industry  and  corporate  contacts  and
through  our  macro/thematic  news.   Once we  identify  potential  investment  opportunities,
we  pore over prior conference calls,  SEC  filings  and  past  earnings  releases to  form  an
understanding  of the  business  history  and  'Unit Economics' of the company.  We typically
contact   company  management   for   CFO-level  discussions  of  cost   functions,  capacity
utilization  and  business outlook,  further  refining  our  thesis.   Only at  this point do we talk
to  contacts  on  the  street  and  look  for  oversights and holes in our thesis.  This diligence
and  deliberation  - resisting  the  impulse  to  turn  too hastily  to  street  analysts- produces
fresh  investment  conclusions  untainted  by  conformity.   Finally,  we develop  an  earnings
model and test its ability to predict past earnings releases, before looking forward  to predict
future earnings. Unlike most firms, we publish the accuracy of  the  earnings  model in every
research report for each company that we follow.

Most   research   firms  stop   here.   But   we  understand  that  successfully  predicting   the
earnings of a company does not always make for a successful  investment.   We take  things
one step  further.   We incorporate   street   expectations  and  investor  sentiment,   gauged
through short  interest, technical analysis, fund manager surveys, options activity  and open
interest in sector funds or ETFs to determine the suitability of the stock as an investment.

We  then  examine  the  risk/reward  of  our  investment  thesis  and  determine   what  other
variables  may   drive  the  shares,  such  as  consumer  sentiment,  GDP  or  energy  prices.
Lastly, we look at the overall portfolio effect of adding the security to one of our portfolios.

Having  passed all of these hurdles, the thesis is monitored and refined as  new  information
becomes  available  and  the size  of  the position is  scaled to reflect  increasing/decreasing
confidence, risk/reward and  'arbitrage' between our view and  what we believe is priced into
the stock.
58 Main St, Unit 2R
East Greenwich, RI 02818
Phone: (617) 227-5871
Fax: (617) 227-5870