Our process

We believe shares in high quality, high return companies can outperform if bought at the right price. We seek to invest in companies with excellent management and strong market positions in attractive industries.


Identify sustainable competitive advantage

Our intensive bottom-up research process seeks businesses that possess characteristics that enable them to repel competition and sustain high returns, including:

  • Intangible assets (including brands, patents and other intellectual property.
  • Network effects that increase the value of a product or service with each incremental user.
  • Scale advantages (including ability to distribute fixed costs across wider user base).
  • Switching costs (products embedded in a customer's processes or supply chain can generate stable revenue streams, particularly in the case of low-cost, but mission critical items).
  • First mover advantage (particularly potent for certain network effect businesses).

Superior financial characteristics

Financial characteristics reflecting capacity to generate and sustain strong growth and returns, including:

  • High free cash flow.
  • Low capital employed/High ROE.
  • Leverage-able business model (costs grow slower than revenues over time).
  • Consistencies of cash flows.
  • Best in class margins.

Management and capital allocation

We seek to identify management teams for which we can identify:

  • Strong track record.
  • Clear strategy for growth.
  • Internal ownership.
  • Prudent capital allocation.
  • Integrity.
  • History of using shareholder funds wisely (no dilutive acquisitions).

Valuation discipline

We are patient and seek to buy companies at a significant discount to our estimate of intrinsic value:

  • Substantial free cash flow yield (typically 4%+).
  • Discounted cash flow valuation to be in excess of the current share price valuation by at least 20% (also undertake multiple analysis to provide sense check).
  • Earnings and cash flow yield of the company’s equity to be greater than alternative investment opportunities of a similar class.

Portfolio construction

Portfolio manager retains full responsibility for capital allocation decisions:

  • Average position size typically 2-3%, maximum 5%, minimum 1%.
  • Position sizing reflects conviction and upside to price target (not index weight).
  • Close consultation with relevant sector analyst on all buy and sell decisions.
  • Sector and country weights are the residual of individual stock selection decisions.
  • Relatively concentrated portfolio of c.40 names.