Our investment strategy flows from our investment philosophy and helps us isolate companies with profit margins below our estimate of their long-run potential and about to enter a cyclical period of superior earnings growth relative to the broader market. This approach typically helps realise value from our investments sooner than may be the case with a standard “bottom-up” value approach, therefore improving our capital allocation over time. We are completely benchmark agnostic which combined with a contrarian and value bias typically generates a return profile uncorrelated with traditional equity benchmarks or long-only equity funds.
By constantly considering our investment philosophy, we ensure that our investment strategy and therefore investment decisions reflect three core pillars –
ALIGNMENT BETWEEN MACROECONOMIC, INDUSTRY AND COMPANY FACTORS IS CRUCIAL
We believe company valuations must be viewed in the context of the industry and macroeconomic landscape. By understanding the broader conditions, we steer clear from the value trap and always seek to understand the catalyst for a potential price re-rating.
WE DO NOT PREDICT THE FUTURE, BUT RATHER GAUGE THE LIKELIHOOD OF A PARTICULAR SCENARIO
Our macroeconomic and thematic views are generated on the balance of probabilities. It is impossible to forecast every indicator but taken together, we assess the most likely market outcome.
MARGIN OF SAFETY IS CRITICAL
We enter positions at a significant discount to intrinsic value, and in so doing create a margin of safety for our investors. We are always mindful of the relationship between risk of loss and potential upside and look for trades that exhibit high levels of asymmetry.