PELICAN

Idea Generation Methodology

Pelican’s idea generation engine is a multi-layered forensic filter designed to isolate high-conviction signals from the noise of global markets. We employ seven independent modules to score every signal on a transparent 10-point scale, ensuring that every idea is auditable and backed by a documented rubric.

The Signal Families

We categorize market intelligence into two distinct streams:

1. Conviction & Behavioral Signals

  • Insider: Tracks open-market purchases by C-suite executives, measuring role-based conviction and material stake increases.
  • Congress: Identifies high-value "cluster buys" and bipartisan alignment within legislative filings.
  • 13F: Detects institutional convergence, elite fund concentration, and "mismatched-size" buying (large funds entering small-cap names).

2. Fundamental & Structural Signals

  • Special Situations: Identifies structural market inefficiencies, including "micro-spins," odd-lot tender offers, and broken deal dislocations.
  • Press Release: Utilizes a "slow-fuse" catalyst framework to score durable, multi-quarter events based on Enterprise Value (EV) impact.
  • Quantitative: A four-pillar model (Valuation, Quality, Health, Consensus) that scores companies based on deep fundamental excellence.
  • Analyst Target: Isolates institutional unanimity by scoring price-target upgrades from elite Tier-1 firms against current market dislocations.

The Scoring Framework

Each module operates on a proprietary scoring matrix that converts raw data points into a standardized Pelican Rating. This 10-point conviction scale allows for direct comparison across different signal types.

  • Transparency: Clients can audit the specific logic behind every rating.
  • Normalization: When specific data points (such as analyst coverage) are unavailable, scores are mathematically normalized to ensure the final 10-point scale remains consistent and unbiased.
  • The Pipeline: Only signals achieving a Rating of 7 or higher enter the deep-dive research pipeline for full fundamental due diligence.

Scoring Rubrics

Module 1: Press Release

Focus: Durable, 3–24 month catalysts measured against Enterprise Value (EV).

Rating Calibration (Direct Mapping):

  • Rating 10: Structural Inflection (economics or asset base redefined).
  • Rating 9: Franchise Altering (fundamental change to financial structure/control).
  • Rating 8: Transformational Catalyst (material multi-quarter rerating setup).
  • Rating 7: Strong Actionable Catalyst (credible "slow fuse" setup).

Scoring Logic:

  • Contracts & Resources: Sole-source contract or resource discovery ≥100% of EV (10); 50–100% of EV (9); 25–50% of EV (8); 10–25% of EV (7).
  • Corporate Actions: Spin-off ≥100% of EV (10); Sale of division >30% of EV (9); Sale of non-core asset 10–30% of EV (7).
  • Capital Allocation: Buyback/Dividend ≥20% of EV (8); 10–20% of EV (7).
  • Liability Management: Debt/Liability elimination ≥50% of EV (10); 30–50% (9); 15–30% (8).

Module 2: Special Situations

Focus: Structural Edge—events where market mechanics force mispricings.

Rating Calibration (Direct Mapping):

  • Rating 10: Structural Arbitrage (mathematical/guaranteed edge).
  • Rating 9: High-Conviction Structural Shifts (reorgs and cannibal buybacks).
  • Rating 8: Alignment & Broken Deal Dislocations.
  • Rating 7: Tactical Events (significant auctions and strategic reviews).

Scoring Logic:

  • Arbitrage: Odd-Lot Tenders with premium; Micro-Spins from Mega-cap parents.
  • Reorganization: New listings emerging from Chapter 11; "Cannibal" buybacks (>15% of float).
  • Activism: Tier-1 Hostile control moves (Elliott, Starboard, Icahn).
  • Dislocation: Merger breaks with >20% price crash; backstopped rights offerings.

Module 3: Congress

Focus: Behavioral conviction from bipartisan and high-value political trades.

Rating Calibration (Raw Points to Rating):

  • 10/10: 10+ Points
  • 9/10: 9 Points
  • 8/10: 8 Points
  • 7/10: 7 Points
  • 6/10: 6 Points (Minimum entry threshold)

Scoring Logic:

  • Base Score (Largest Trade): >$250k (9 pts); $100k–$250k (8 pts); $50k–$100k (7 pts); $15k–$50k (6 pts); $1k–$15k (5 pts).
  • Cluster Bonus: +1 pt for every additional member buying beyond the first.
  • Bipartisan Bonus: +1 pt if the cluster includes both Republican and Democrat members.

Module 4: Insider

Focus: Open-market purchases by C-suite executives and directors.

Rating Calibration (Raw Points to Rating):

  • 10/10: 15+ Points
  • 9/10: 12–14 Points
  • 8/10: 9–11 Points
  • 7/10: 6–8 Points
  • 6/10: 4–5 Points

Scoring Logic (Per Insider):

  • Role: CEO, CFO, or COO (+3); Director/Chairman (+2); Other Insider (+1).
  • Value: >$1M (+5); $250k–$1M (+3).
  • Stake Increase: >100% (+5); New Position (+4); >25% (+2).
  • Signal Bonuses: 3+ Insider Cluster (+4); 2 Insider Cluster (+2).

Module 5: Quantitative

Focus: Fundamental excellence across valuation, quality, and health.

Rating Calibration (10-Point Normalized Scale):

  • 9.0 – 10.0: Elite Signal
  • 8.0 – 8.9: Strong Signal
  • 7.0 – 7.9: Noteworthy Signal
  • 6.0 – 6.9: Meets Minimum Criteria

Scoring Logic (Max 10 Points):

  • Valuation (3.0 pts): EV/FCF <10 (+2.0); P/B Ratio <1.2 (+1.0).
  • Quality (3.0 pts): ROIC >20% (+1.0); ROE >20% (+1.0); Gross Margin >50% (+1.0).
  • Health (2.0 pts): Net Debt/EBITDA <2.0x (+1.0); Interest Coverage >5.0x (+1.0).
  • Consensus (2.0 pts): Implied Analyst Upside >100% (+2.0); >60% (+1.5); >30% (+1.0).
  • Note: If Consensus data is missing, the score is scaled from 8.0 up to 10.0 (Normalized).

Module 6: Analyst Target

Focus: Sell-side conviction and price-action dislocations.

Rating Calibration (Raw Points to Rating):

  • 10/10: 11+ Points
  • 9/10: 9–10 Points
  • 8/10: 7–8 Points
  • 7/10: 5–6 Points
  • 6/10: 3–4 Points

Scoring Logic:

  • Analyst Conviction: ≥100% Upside (+7); ≥75% (+5); ≥50% (+3).
  • Consensus Alignment: Consensus Upside ≥50% (+4); ≥30% (+2).
  • Firm Quality: Target issued by an Elite/Tier-1 Firm (+2).

Module 7: 13F

Focus: Institutional conviction and "mismatched-size" buying.

Rating Calibration (Raw Points to Rating):

  • 10/10: 28+ Points
  • 9/10: 22–27 Points
  • 8/10: 16–21 Points
  • 7/10: 11–15 Points
  • 6/10: 7–10 Points

Scoring Logic:

  • Convergence (Max 10): Top 5 position in 10+ funds (+10); 5-9 funds (+8); Top 10 in 10+ funds (+6).
  • Buying Activity (Max 10): New position for 5+ funds (+10); 3-4 funds (+8); 1 fund (+5).
  • Conviction (Max 10): Position >25% of a fund's portfolio (+8); >15% (+6); >10% (+4).
  • Mismatched Size: Mega-fund (>$20B AUM) buying Micro-cap (<$500M) (+10); Mega-fund buying Small-cap (+8).
  • Kicker: Issuer market cap <$100M (+2).

Execution & Performance Accountability

The Research Pipeline

The ultimate objective of our methodology is to isolate actionable alpha. Every day, our system updates our Idea Generation Tracker with conviction scores, source filings, and forensic metadata.

  • Prioritization: Signals that meet our "High Conviction" threshold (Rating 8.0+) are immediately elevated into our research pipeline.
  • Full Diligence: These top-tier ideas undergo full-cycle fundamental analysis, management vetting, catalyst modeling, and more to move from "signal" to "investment."