Strategy

  • The manager’s philosophy centers on two core beliefs about investing. First, all things (e.g., companies, industries, sectors and economies) cycle. Second, most people forget or inefficiently react to this first thing. The manager focuses on identifying companies that surprise the market by their participation in an earnings growth cycle. The team seeks to earn excess return as corresponding investor cynicism about this participation declines from elevated levels.
  • Initial investments are focused on companies that have recently entered or are extending an earnings cycle. They tend to have an improving foundation of earnings, cash flow, sales, etc., and are typically surrounded by some level of cynicism or investor neglect.
  • The selection process is built on the idea that good investing discipline starts with an explicit identification of what one is looking for combined with the willingness and ability to look broadly for it. The manager believes quantitative tools are particularly good at addressing both these requirements. They force the investor to clearly identify the type of investment opportunity he or she seeks while allowing the investor to objectively look across a broad universe for those opportunities.
  • Starting the process with quantitative tools provides confidence that opportunities fit within the team’s philosophy but the manager believes that the subjective nature of investing requires the steady hand of an experienced professional. The manager’s long-tenured investment professionals use their judgment and expertise to confirm potential investment ideas uncovered by the process. The final decision is theirs to make.

Goals

  • Take advantage of the breadth provided by quantitative tools and the depth of qualitative analysis to identify both the rewards and the risks associated with potential investments
  • Maximize portfolio diversification through explicit early identification of the risks associated with each potential investment idea
  • Earn excess return by buying companies that “surprise” the market as they overcome negative or cynical sentiment

 

A Word about Risk

International investing presents specific risks, such as currency fluctuations, differences in financial accounting standards, and potential political and economic instability. These risks are further accentuated in emerging market countries, where risks can also include possible economic dependency on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, and liquidity risks related to lower trading volumes. The fund may invest in small- and mid-cap stocks, which may may involve greater risks than investing in larger, more established companies. These companies often have narrow markets and more limited managerial and financial resources.