INVESTMENT PROCESS



    OUR KEY INVESTMENT BELIEFS
  • Financial markets, in general, offer opportunities that can be exploited.
  • In the long run aggregate share and property prices are affected by the growth rate of the economy.
  • All tradable and investable financial securities have a niche in the risk-return tradeoff spectrum, from money market instruments to cyclical equities.
  • The key risk factor facing investors’ is the risk of permanent loss.
  • The financial environment is global and markets are, in the long-run, driven by the robustness of both the domestic and global economy. This underpins the earnings on which company valuations are based as well as the interest rate environment in which money and bond markets function.
  • A top-down assessment of the major themes operating around the world is critical to understanding the valuations placed at any time on securities in markets.
  • Diversification and the understanding of the different sources of returns that are weakly correlated with other assets are important in constructing risk-adjusted portfolios. These might include currencies, commodities, exchange-traded funds, derivative strategies and small-cap stocks.

OUR EQUITY INVESTMENT PHILOSOPHY & PROCESS

At Counterpoint we believe that equity investing is most successful when it is most business minded. We view equities as ownership stakes in productive and dynamic enterprises. As such we conduct rigorous investment research into companies’ business models, industries, socio-economic environments and future prospects.

We believe that by focussing our efforts on companies with track records of sustained value creation and operating excellence coupled with attractive prospective opportunities we significantly increase the probability of achieving superior investment returns, while reducing the risk of sub-optimal outcomes.

Cardinal to profitable investing is the price paid compared to intrinsic value. We always take a long term view when estimating a company’s underlying worth. Valuations are fundamentally driven and based on long term estimates of future cash flows to shareholders. Critical to this process is an understanding of management’s ability to productively allocate capital in relation to acceptable hurdle rates, as ultimately this drives future value creation. These required rates of return are viewed within the context of the broader market and macroeconomic environment and need to be weighed against expected returns on competing assets and asset classes.

Our principal aim is to invest in quality companies at prices that are conducive to generating attractive risk adjusted returns over a sustained number of years.

Thorough analysis is performed on each investment, each being subject to stringent qualitative and quantitative criteria. Current and prospective positions are then vigorously debated by the investment team. Forecasts and valuations are stress tested under various operating and economic scenarios to present an informed picture of a company’s sensitivity to the risks and opportunities faced. This provides insights as to what margin of safety should be built into valuations. The future is by nature uncertain and the risk of error needs to be astutely managed. Investments are at all times closely monitored for any changes that may affect their fundamental values while assumptions regarding investment cases are regularly re-tested for robustness.

  


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