We believe that fundamental research is the key to making good investment decisions.
We follow a clear and compelling logic when making decisions. Our assessment of the quality of management is the single most important factor when making investment choices.
We enjoy longstanding relationships with many of the executive directors of listed companies, which allows us good corporate access. Our ability to anticipate positive and negative catalysts sets us apart, and we believe that the decision around position size is just as important as the investment decision.
Our primary focus is the top 100 companies by market capitalization, and we prefer to invest where we have an established competitive advantage. However, with our passion for upliftment, we do look at smaller companies whose return profile compensates for the increased risk.
We have found that assets are often mispriced by the market. To counteract this, we have a highly systematic and disciplined process to determine pricing.
We diligently gather in-depth information by performing detailed ‘bottom up’ analyses of individual companies. We have a deep understanding of industry dynamics from decades of experience working with the JSE. The ‘bottom up’ research method allows us a thorough view of the financial model for each company. Free cash flow is the foundation of our valuation.
Each individual company model is run through a master information model that incorporates forecast earnings and predicted ratings for each stock.
We are smart, but we haven’t mastered predicting the future… yet. So we always take care to adjust the research results to account for the unknown. The output is then ranked in terms of forecast returns for individual shares. It is often difficult to anticipate every possible outcome, so we do incorporate a margin for error in our forecast returns.
We limit the use of derivatives in hedging, and we prefer to use short stock positions.