Research process

The research and analysis we carry out includes developing both a detailed understanding of the industry that the company operates in as well as identifying and modelling the major drivers of the company specific valuation. This analysis includes income statement, cash flow and balance sheet analysis. Analysts are responsible for becoming in-house company experts, and their role includes the following:

• Ownership of the in-house models and data bases
• Developing financial models of both the history and forecasted future
• Building and maintaining relationships with company management
• Conducting ongoing management interviews and site visits
• Communicating ideas to the rest of the investment team

The interaction between our analysts and portfolio managers is very much a two-way street. The research team has standardised the process of analysing each of the companies in our investment universe according to the factors displayed in the chart below:

• Economic Moat - A competitive advantage that the company has over any similar investment opportunity that will allow it to continue to produce earnings that are ahead of the market.
• Stewardship – The quality of management is assessed in terms of accounting transparency, board independence, ownership and management incentives and, finally, strategy and execution.
• Valuation – Discounted Cash Flow models in conjunction with other valuation techniques are used to determine the fair value of each company.
• Uncertainty Rating - Predicting future earnings is made more difficult when a company has a history of producing volatile earnings or is expected to produce volatile earnings. Therefore, a company that has a more stable approach to renewing corporate value would provide greater predictability with regard to its fair value.