INVESTMENT PROCESS
Value Conscious and Event-Driven
Our research is not only based on sound financial analysis but also on street smart business judgement in determining investments.
Our process focuses on three approaches in identifying investment opportunities:
Value: Our research is founded on a search for value. We are bargain hunters, not momentum chasers or closet-indexers. We look to invest in undervalued companies or mispriced securities. We therefore look for companies that are trading at low multiples to earnings, cash flow, or book value, because they are less well known, misunderstood, illiquid or temporarily out-of-favour. However, we are careful not to fall into a “value trap” of investing in dying businesses.
Growth at a Reasonable Price (GARP): Or as we say: Growth at a “Responsible” Price.
While we generally have to pay-up for growth, there are limits to what we are willing to pay. We want to buy as much growth as possible for as little as possible, before analysts and the masses drive up valuations to unreasonable levels. This entails seeking companies that have reasonable multiples relative to their growth rates.
Special Situations: We also look for event-driven situations for which we expect some shareholder value-enhancing event to occur, such as a dividend increase, share buy-back, spin-off, merger, accretive acquisition or an outright sale. Special situations can also involve companies where industry consolidation is taking place or that operate in sectors that analysts don’t follow or in areas that are being neglected by the market. We also remain ready to seize attractive opportunities as they unexpectedly arise.
Management Record and Experience
Growth Patterns
Profitability History
Performance versus Expectations
Execution of Business Plan
Return on Equity |
Ownership Structure
Management Team
Business Strategy
Competitive Position
Balance Sheet
Profit Margins
Free Cash Flow
Relative Value (multiples)
Discount to Intrinsic Value |
Earning Predictability
Realism of Forecasts
Growth Opportunities
Private Market Value
Catalyst/Value Maximizing Event
Analyst Coverage
Institutional Interest |
OUR PHILOSOPHY – Higher Returns with Lower Risk
HOW WE ADD VALUE FOR YOU – Different from the Index
VALUE TRUMPS GROWTH – The Underestimated versus the Overhyped