Stock Research Focus
It is our research process that drives our ability to identify opportunities.
Importantly, this research is driven by talented and experienced investment professionals.
Our research is in two parts:
- Proprietary research on the company - its growth opportunities, applicable strategy, quality of management, industry dynamics, execution risks and ESG assessment; and
- Financial Analysis – earnings, cashflow and balance sheet modelling, and the valuation of the company.
Our research process is focussed on answering 5 key questions:
1. What is the growth potential? In assessing the growth options we identify the key drivers. Growth can be either: organic (due to superior market fundamentals or relative competitive position); by acquisition; or cyclical. We also consider the sustainability of growth.
2. Can management deliver? We determine whether a management team can successfully execute a business strategy to exploit growth opportunities.
3. Financial strength? Through our integrated financial modelling we deduce whether the company can support our expectations for growth.
4. What are the risks? Through our company, industry and market knowledge we assess whether any material risks are at play, whether they can be managed and how they may impact future prospects and valuation.
5. What price should we pay? We derive a company valuation using our detailed financial modelling. This value is compared to the prevailing share price as well as all other company valuations in the universe of stocks under coverage. Therefore we can deduce the relative attractiveness of the investment opportunity.
From this research, we construct a portfolio of stocks in which we have a high conviction they can successfully execute their growth strategy, and are undervalued compared with the prevailing share price.