The investment process of John Hancock Fundamental Large Cap Core Fund includes careful scenario analysis of the best, base, bear, and worst cases for each company in which the team invests. When market volatility spiked as the COVID-19 crisis worsened in March, Senior Portfolio Manager Sandy Sanders and his team revisited the worst-case scenario for every stock in the portfolios they manage. This careful process yielded a variety of valuation-based investment opportunities just as many market participants were dashing to cash.
What we did was we raised our game on our worst-case scenarios. We, basically, we follow 200 stocks and went through in detail all of the worst-case scenarios for our companies. We do four cases for every stock: a best case, a base case, a bear, and a worst. And the worst case is really the nuclear scenario. Everything goes wrong, the company's revenues decline, margins go down sharply, and it's an elongated, very dramatic downturn in the business. And the key point is that the worst case, our assumptions that we don't think is going to come true, but we want to model that anyway to understand what the range of outcomes could be potentially, if we're wrong in our base-case assumptions.
So we started essentially early in March: We went through all 200 companies and, basically, some companies, we made modest changes where there was fairly limited change to the worst case; some we reduced about 10%. But this gave us the ability to look at a business and say if a stock goes down sharply and it gets to our new worst-case level, our worst cases and bending assumptions that we think are quite unlikely to come true over time. So that is what we've been doing in the start of March. Then, when the market really started to move to the downside in weeks two and three of March, we were able to proactively lean into opportunities that we have not seen essentially since 2009 from a valuation standpoint. We were looking at companies at 30, 40, 50 cents on the dollar in many, many situations.
And some stocks had punched through their worst cases. For example, if you look at our risk/return analysis, we generally look for a 2:1 upside-to-downside base to bear. And when you can get 2:1 base to worst, that's a very strong risk reward. In the middle of March and the third week of March, we were seeing many examples where some of our stocks were going three, four, five times base to worst, which is an extraordinary risk/reward that you do not see very often. So we were quite active during this period, scooping up many great businesses near their worst-case values. As we think those values basically are temporary, we do not think the fundamentals that the stock was embedding will likely come true. So, therefore, the risk/reward of these stocks, in our view, based on our process, looked attractive.