As holistic investment managers, we believe an awareness of the macro environment – combined with a thorough knowledge of the micro aspects of any company – is essential.
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 discount the projected future sustainable cash flows to the present thereby obtaining 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.