We are 100% unapologetic bottom-up stockpickers because we think this is where we can add value.
There are two key parts to our process. First, through our fundamental research we identify what we believe to be the fair value of companies in our approved research list. For these 100–120 companies we have done sufficient due diligence and have satisfied ourselves that they are high-quality, strong businesses. This is our gene pool. Secondly, we construct and deliver these undervalued names in a balanced portfolio.
Each of the stocks on the approved list comes with its own baggage, its own factor risk. The way we put them together is like a jigsaw puzzle. We are always aware that the portfolio we are building may have inherent factor risk that we did not intend. The end result is that our highest-conviction companies drive the portfolio.
A key aspect of our process is that we are patient, long-term investors with a three-to-five year investment horizon. That means we attempt to minimize investment turnover, so as my father used to say when doing DIY, we want to measure twice and cut once. In choosing any company to include in a portfolio, we consider three things: our view on the company's ability to reach our expected target, our conviction as to its business model and finally what role the shares of that company will play in the portfolio.