Investment Process

We adopt a ‘value approach’, which entails identifying companies that are priced below our estimation of intrinsic value. This is based on our calculation of a fair median value for the company over a complete economic cycle and also necessitates the normal process of forecasting sustainable future company earnings and growth rates.

Using these variables, plus a fair assessment of an associated risk premium, we will utilise standard valuation techniques to obtain an estimated intrinsic value. This is, however, only one part of our investment process.

We pay equal attention to other critically important factors such as the macroeconomic or industry backdrop (cyclical and secular trends) and important qualitative factors, such as the strength and experience of a company’s management team.

Depending on our analysis of such factors our assessment of the risk profile of any prospective investment and hence intrinsic value will be adjusted accordingly.

Investment Sweet Spot

Our long equity positions are in those companies where macroeconomic, industry and company fundamentals are in alignment.

Companies which are typically identified as ‘value investments’ need an economic or industry catalyst to support and propel their price.

Without a conducive macroeconomic or industry backdrop, there is a danger that value stocks just stay cheap – this is the value trap we work hard to avoid.

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