Investment process
Our value investment process emphasizes bottom-up fundamental research, using both quantitative and qualitative techniques.
Screening of the Universe
Our screening process starts by looking at an investment universe which consists of global holding companies, closed-end funds and asset backed companies.
We have detailed models on approximately 400 companies out of this universe, which track stock prices and earnings information.
We monitor
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100+European Holding Companies
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100+Asian Holding Companies
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650+Closed-end Funds
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100+Japanese asset-backed companies
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100+Other asset-backed situations
Detailed models for c.400 companies
Family-controlled holding companies
Family-controlled holding companies
Listed closed-end funds, majority London-listed
Heavily over-capitalised operating companies with significant cash and security backing
South American, US and African holding companies, as well as property companies
Filtering
Throughout the filtering process we ask the following questions:
- Is the stock trading at the wider end of its discount range
- Are we comfortable with the NAV
- Do we like the valuations
- Do we want to own the underlying businesses
- Does the business have a strong balance sheet
- Is the company headed by an honest, intelligent management team with a good track record who is willing to engage with shareholders
- Can we see a catalyst to bring the NAV back to its true value
- Is the political and economic environment amenable
Research
Our analysts track stock prices, earnings and balance sheet information with an aim to identify good quality companies trading on a discount to their NAV which exhibit clear trends to create long-term value. Research includes:
- In-depth analysis of company annual reports and filings
- Consulting with industry contacts and brokers
- Bottom-up analysis of a company’s fundamentals, management and industry trends
- Specific focus on identifying the catalyst which will reduce the discount and unlock value
- Regular meetings with top level management
Portfolio construction
The objective of our portfolio construction process is to end up with a concentrated portfolio of about 50-60 holdings, facilitating a clear monitoring process of the entire portfolio.
We pick stocks that meet our investment criteria and once we decide to invest we seek a minimum position size of approximately 2% of the portfolio, however the timing of the catalyst and the liquidity of the stock can result in the holding being greater or lesser than 2%.
Factors which will impact the sizing of a position
- Liquidity
- Diversification
- Discount