Our investment approach is centred on identifying quality companies, buying them at a sensible price and holding for the long term. We look for founders and management teams that act with integrity and risk awareness; and dominant franchises that have the ability to deliver sustainable and predictable returns over the long term.
Our investment approach has a number of key features:
Bottom-Up Stock Selection
We are research-driven, bottom-up investors, carrying out detailed fundamental analysis to identify high quality companies to invest in for the long term. We travel extensively to meet with companies to assess the quality of management and their track record of executing long-term strategies; and supplement this with a qualitative and quantitative analysis of the company’s ability to compound growth in excess of the cost of capital.
We define quality companies as those that have an effective management team, high governance standards, a long-term mind-set, strong competitive advantages and an established track record of surviving previous cycles. In addition, we look for cultural integrity and the alignment of management with shareholders. We also make use of ESG analysis to distinguish quality companies from the rest. We believe that owning quality companies that are able to respond effectively to market uncertainties is the best way to avoid losses in the medium-to-long term.
Strong Valuation Disciplines
We strive to ensure that we pay sensible prices for our investments. We use a range of financial and non-financial metrics to estimate a fair market valuation (FMV) for the companies that we want to own and buy at price levels which provide a sufficient ‘margin of safety’ over the medium-to-long term. We carry out regular FMV reviews to update the potential risk/reward of every stock in our portfolios and on our watch list.
We are responsible, long-term investors and prefer to invest in quality companies that we can buy and hold. Through active engagement, we believe we are able to raise legitimate concerns and persuade management to address the issues at hand, thereby adding to portfolio performance. We believe our approach encourages good ESG practices and is a critical part of our stewardship duties.
Absolute Return Mind-Set
We are conservative investors with an absolute return mind-set. Defining risk in terms of the permanent loss of capital, we evaluate the potential downside of an investment decision as much as the upside. We would expect our portfolios to exhibit lower volatility than the peer group and outperform more often in down markets. Conversely, we would expect our performance to lag in highly buoyant or momentum-driven markets.
We do not use benchmark indices in our portfolio construction process as we do not believe that they fully represent the available opportunities within Asia Pacific and Global Emerging Markets. Instead, we rely on our bottom-up stock selection to construct relatively concentrated and high-conviction portfolios. As we are not required to own companies, sectors or countries that we do not favour, our portfolio weightings can look very different to the benchmark.