Altitude Funds
Uses the 12-month forward price-to-earnings ratio (P/E) over the forecasted earnings per share (EPS) to select stocks.
Pioneer Funds
Compares a company P/E with an industry average P/E in order to invest in firms that are under-priced.
Q. Using Exhibit 1, Leeter’s statement about Altitude Funds and Pioneer Funds is most likely:
- correct.
- incorrect in regard to Altitude Funds.
- incorrect in regard to Pioneer Funds.
C is correct. The statement is incorrect in regard to Pioneer Funds but is correct in regard to Altitude Funds. Pioneer Funds uses a relative value strategy (i.e., seeks under-priced securities relative to an industry value benchmark) that has no aspects of a growth strategy. Altitude Funds uses a hybrid of value strategies (use of P/E) and growth strategies (use of forward EPS) known as GARP (growth at a reasonable price).
