INVESTMENT CRITERIA | Modena Holdings

Investment Criteria

Modena employs a set of financial and ESG criteria when considering which companies to invest in. You can find this criteria below.

Qualitative Metric Evaluation Rubric

Commodity Exposure & Hedging preference for balanced portfolios (oil vs. gas, hedged cash flows).

Infrastructure Quality for midstream, long-term contracts & fee-based revenue models reduce volatility.

Transition Strategy investments in renewables, carbon capture, LNG, etc., for long-term relevance.

Geopolitical Diversification leads to diversified assets across stable jurisdictions mitigate political risk.

Operational Track Record reflecting safety, cost efficiency, project delivery discipline.

Brand Strength & Loyalty ensures pricing power and repeat purchases, reducing reliance on discounting.

Competitive Advantage sustains market share and profitability through differentiation, distribution dominance, or cost efficiency.

Market Positioning & Consumer Trends ensures relevance and long-term growth by aligning with health, sustainability, and digital adoption.

Management Quality & Strategy drives compounding value creation through disciplined capital allocation and adaptability.

Distribution & Channel Mix enhances scalability and resilience with balanced retail, direct-to-consumer, and global reach.

Customer Experience & Engagement supports retention and organic growth through satisfaction, loyalty, and strong digital presence.

ESG & Reputation strengthens brand equity and reduces controversy risk through credible sustainability and responsible supply chains.

Moat & Competitive Advantage ensures durable market position through network effects, high switching costs, or proprietary technology.

Management & Vision demonstrates consistent execution, disciplined capital allocation, and adaptability to tech shifts such as AI, cloud, or cybersecurity.

Business Model Quality captures recurring revenue streams and scalable cost structures that support long-term profitability.

Product & Technology Edge highlights reliable, high-quality products and the ability to stay ahead of competitors through innovation.

Customer Base & Retention emphasizes broad adoption, strong renewal rates, and diversified client portfolios to reduce concentration risk.

Market Position & Growth Opportunities identifies critical placement in the tech stack, strong market share, and potential to expand into adjacent markets.

Regulatory Compliance & Capital Adequacy reflecting strong CET1 ratios, solvency metrics, stress-test resilience.

Diversification leads to broad product/geographic mix reduces risk (e.g., banks with retail + investment banking + wealth).

Technology Adoption as digital banking, payments, fintech integration matter for long-term competitiveness.

Management Discipline reflecting a track record of risk management, credit quality, and shareholder alignment.

Mission & Alignment with B Corp Principles ensures clarity, authenticity, and integration of social and environmental purpose into the core business.

Governance & Accountability demonstrates strong board structure, stakeholder alignment, and transparent reporting of ESG and impact metrics.

Social Impact reflects fair employee treatment, community engagement, and responsible supply chain practices.

Environmental Impact captures sustainability initiatives, resource-efficient product design, and credible third-party certifications.

Brand & Reputation strengthens customer trust and loyalty through purpose-driven branding and positive public perception.

Customer & Market Positioning aligns with consumer trends, supports premium pricing, and differentiates the company through responsible practices.

Asset Quality & Location make prime properties (Class A apartments, top-tier malls, destination resorts) outperform.

Brand Strength in hotel flagships (Marriott, Hilton) and casino brands (MGM, Wynn) drive pricing power.

Cyclicality Exposure makes us prefer a diversified portfolio (urban + resort lodging, multiple geographies).

REIT Management Track Record reflecting a strong history of acquisitions, development, and disciplined capital allocation.

Financial Metric Evaluation Rubric

Market Cap (>$5B) screens for integrated majors, strong independents, and infrastructure players.

EV/EBITDA (<8x) captures cyclical nature; ensures we’re not overpaying in peak commodity cycles.

Price/Free Cash Flow (<15x) energy firms must return cash in upcycles and sustain capex in downturns.

Debt-to-Equity (<50%) leverage discipline is crucial in a cyclical, capex-heavy industry.

Dividend Payout Ratio (<70%) sustainable shareholder returns even when oil/gas prices dip.

EPS Growth Next 5 Years (3–5%) for upstream, disciplined growth without overspending.

Excessive Debt (Debt-to-Equity <3x or Interest Coverage <3x) prevents over-leverage, protecting retail companies from cyclical shocks and margin pressure.

Profit Margins (Gross Margin ≥Industry Average) signals pricing power and durable economics, avoiding commodity-like products with thin or declining profitability.

Return on Capital (ROE/ROIC ≥10–12%) ensures strong compounding potential and indicates the presence of a sustainable competitive advantage.

Free Cash Flow (Positive & Predictable) identifies businesses that generate ample cash, enabling reinvestment and shareholder returns while avoiding cash-consuming operations.

Inventory Management (Stable Turnover & Aligns with Sales) reduces discounting risk and supply chain inefficiencies, signaling healthy demand and operational control.

Balance Sheet Liquidity (Current Ratio ≥1) safeguards against consumer demand swings and seasonal shocks, ensuring the company can meet short-term obligations.

Earnings Quality (GAAP-Aligned & Sustainable) avoids reliance on aggressive accounting or adjusted EBITDA, reflecting true economic performance.

Dividend Sustainability (Payout Ratio ≤70%) supports reliable shareholder distributions while preserving cash for reinvestment and growth.

Market Cap (>$5B) filters for established REITs, hotel chains, and gaming operators with scale and liquidity.

P/FFO (<18x) ensures reasonable valuation vs. property cash flows.

RevPAR Growth (3%+ CAGR) for hotels/lodging, steady revenue-per-available-room expansion signals strong demand.

Leverage (Net Debt / EBITDA <6x) real estate & gaming are asset-heavy; manageable leverage is critical.

Dividend Yield (2%–5%) signals stable cash returns while retaining capital for property reinvestment.

Market Cap (>$10B) ensures scale in a sector where trust and capital adequacy matter.

P/E (<15x) means banks/insurers trading below long-term averages offer value.

ROE (>10%) reflects efficient capital deployment in financial businesses.

Net Interest Margin (>3%) for banks and specialty finance, indicates healthy lending economics.

AUM Growth (5%+ CAGR) for asset/wealth managers, steady inflows drive fee revenue.

Excessive Debt Reliance (Debt-to-Equity <4–5x or Interest Coverage <4–5x) ensures the company scales with retained earnings, not borrowed money, supporting a fortress balance sheet like Apple, Microsoft, or Google.

Gross Margins (≥40% in software/semis) signals durable economics, avoiding commodity-like products or contract manufacturing models.

Free Cash Flow (Positive & Stable) identifies businesses generating cash outside of temporary reinvestment cycles, avoiding “growth at all costs” models.

Return on Invested Capital (ROIC ≥12–15%) demonstrates the ability to reinvest profitably and sustain a quality business over time.

Earnings Quality (GAAP-Aligned & Transparent) ensures reported profits reflect true cash generation, avoiding aggressive accounting or “adjusted” numbers.

Customer Concentration (<30–40% from any single client) reduces revenue fragility and dependence on a few key customers.

Unsustainable Dependence on Mission-Driven Marketing (Revenue Not Market-Driven) ensures the business model stands on its own, not just the B Corp label or mission-driven appeal.

Profit Margins (Operating Margin ≥5%) signals pricing power and sustainable economics despite ESG initiatives.

Free Cash Flow (Positive & Predictable) identifies companies generating cash even while reinvesting in social or environmental projects.

Debt Levels (Debt-to-Equity ≤1.0) prevents overleveraging to fund non-core initiatives, maintaining financial resilience.

Return on Invested Capital (ROIC ≥10%) demonstrates the ability to reinvest profits effectively, even in mission-driven contexts.

Earnings Quality (GAAP-Aligned & Transparent) ensures reported profits reflect true cash generation, avoiding adjusted or “impact-weighted” metrics.