Our Active Investment Strategy
A disciplined research process intended to include a thorough understanding and analysis of each investment opportunity
Our investment objective is to achieve superior returns over a multi-year period through all phases of the market cycle by applying an opportunistic, value-oriented approach to investing.
Within our active equity investment strategy, we target a return greater than 2% p.a. net of our fees above the S&P 500 index over rolling 3-year periods.
The investment strategy incorporates a disciplined research process intended to include a thorough understanding and analysis of each investment opportunity’s fundamental and intrinsic value, coupled with an appreciation for the macro environment, economic cycles, and other key factors such as public policy, industry, and political developments.
We believe that a fundamental-based approach to investment analysis is best suited to evaluating investment opportunities in the equity market.
The investment strategy involves taking a directional view utilizing our deep knowledge of companies and industry sectors and leveraging our analysis performed on one investment to make other investments.
We look for companies that exhibit these characteristics
Simple and Easy. They are simple and have easy to understand business models. We never invest in any idea they can’t explain in relatively simple terms.
Dominant. They are dominant in their industry, and have been through periods of recession and emerged stronger.
Superior Returns. The exhibit superior returns on capital achieved through high margins.
Competitive Advantages. They have a sustainable competitive advantage. These protect the business from the competition and allowing management to increase prices above inflation without losing market share.
Free Cash Flow Generation Relative to Price. They have a significant free cash flow generation capability. Companies that create excess cash over and above the business’ annual capital requirements.
Free Cash Flow Consistency and Growth. Ideally, they will display low volatility in the generation of free cash flow, which can be a measure of the likelihood an investment will produce reliable returns in the future. Also, free cash flow should display growth over time.
Strong Balance Sheet. They have a strong balance sheet with sensible gearing levels.
Quality Management. They have high-quality management with a proven track record of outstanding performance. Management should display honesty, intelligence, and integrity.
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