Our overriding objective is to invest in companies we believe possess the attributes to compound shareholders’ equity at high returns over meaningful time periods.
We have an inherent bias towards growth and quality. We pay specific attention to the durable competitive advantage and the companies’ track record in adapting to changing circumstances.
From our experience, the best driver of returns are high-quality compounders. These are companies that have business models that can scale up by reinvesting capital at incrementally higher rates of return over time. These types of businesses are few and far between, but by focusing on an emerging markets universe with attractive demographic tailwinds, our chances of finding them are more probable.
On the short side we are on the look out for vulnerable companies in the same fundamental areas to fund our long positions. Stalling cashflows with increasing debt, businesses that haven’t been able to keep up with the evolution of the operating environment, and industries in structural decline with little or no macro tailwinds to keep the growth algorithm in motion are “in the arc ” of what we look for to fund our core book of long positions. One of our key investment themes is that emerging markets are undergoing upheaval at a structural level rather than cyclical level – herein lies the greatest opportunity in many decades.