We have developed a unique multi-stage investment process that is designed to identify stocks with potential for out-performance.
Investment themes are created by refining broad concepts into specific insights which provide investment opportunities on a long term month horizon (12 months and more). Typically our themes relate to sectors. We have found also that the most powerful investment ideas emerge from analysis of supply conditions and changes in the competitive structure of an industry.
Our ideas originate from many different sources but principally from industry contacts including trade publications and interviews with management of companies we analyse. We also follow the research of some brokerage analysts whose work has proved to add value.
The objective is to identify dominant structural changes which will lead to surprises (typically profit performance and free cash flow generation) that will lead investors to re-evaluate the sector.
The key steps of the process for refining themes are analyses of the following:
We have a separate due diligence process for individual stocks. The due diligence process focuses on the following:
We use several different methods for position sizing. The key factors affecting the size of a position are the likely to contribution to future portfolio returns, the risk of the position and our conviction in the stock. The contribution to returns is related to the target price. Risk is assessed by historic volatility, liquidity and an the country of operations.