A flexible, research-driven mid-to-large cap portfolio with an attractive risk/return profile
- Seeks differentiated mid-to-large cap quality businesses with an enduring competitive advantage trading at reasonable prices (QuaRP)
- Disciplined investment approach focused on strategic fundamental analysis and valuation assessment
- Comprehensive risk management embedded in portfolio construction and oversight processes
Market Risk: The risk of a change in the value of a position as a result of underlying market factors, including among other things, the overall performance of companies and the market perception of the global economy.
Liquidity Risk: The risk that the portfolio may be unable to sell an investment readily at its fair market value.
Emerging Markets Risk: Emerging markets are likely to bear higher risk due to a possible lack of adequate financial, legal, social, political and economic structures, protection and stability as well as uncertain tax positions which may lead to lower liquidity. The value of a portfolio may experience medium to high volatility due to lower liquidity and the availability of reliable information, as well as due to the strategy's investment policies or portfolio management techniques.
Counterparty Risk: The risk that the portfolio may be unable to sell an investment readily at its fair market value.
Operational Risk: The risk of direct or indirect loss resulting from inadequate or failed processes, people and systems including those relating to the safekeeping of assets or from external events.
Currency Risk: Investments in a currency other than the base currency of the portfolio are exposed to currency risk. Fluctuations in exchange rates may affect the return on investment. If the currency of the portfolio is different from your local currency, then you should be aware that due to exchange rate fluctuations the performance may increase or decrease if converted into your local currency.
Believe fundamentally-based research process can identify potential outperformers:
- Quality companies: Returns of 1.5x cost of capital, organic growth, strong balance sheets
- Reasonable price: 50% appreciation potential over 3 years
Investments are primarily selected by measuring sensitivity and correlation to changes in long-term inflation expectations
- Companies with market cap ≥ $2.5 bn and ≥ $5 mm daily liquidity
Quality Track Record
- Profitability: ROIC ≥ 12%1
- Growing: EPS Growth ≥ 5%
- Financially Strong: Net Debt/EBITDA < 2.5x for non-financials
- Industry and competitive positioning analysis
- Historically averaged approximately 1,000 company meetings annually; 50+ weeks of travel to international markets
- Meet with competitors, suppliers, clients and regulators
- Proprietary discounted cash flow model to identify 50% upside potential over 3 years
- Analyze sensitivity to core revenue, margin and cap-ex assumptions
- Consider other valuation metrics: P/CF; P/E; P/BV; EV/EBITDA
- Measure risk at the security and portfolio level
- Position size based on potential upside and level of conviction
- Typical 30–50% turnover
1For financials the team looks for sustainable ROE > 12%.