Bottom-up analysis

First and foremost, we are looking for quality businesses. In order to achieve this, we undertake a detailed analysis of individual companies within the industries with growth prospects (as identified in our top-down review). We apply qualitative criteria that help us identify and select suitable prospects.

The investment team will assess factors such as the:

• competency and credibility of the company’s management
• company’s strategy
• competitive position within the relevant industry
• impact of the industry and the economy on the company’s competitiveness
• financial structure
• growth prospects and the ability to fund this growth

Particular characteristics we look for are an ability to earn a high return on equity, low debt and consistent earnings history. See the case study section for examples of companies we believe meet some of these qualitative criteria. (Note: password required)

We place significant importance on being “hands-on” business analysts as opposed to desk-top “stock” analysts. Our team makes more than 400 company visits a year and each member spends a total of two to three months travelling around the region.

Companies that meet all our criteria and stand out as high quality businesses with strong growth prospects are placed on an ‘A’ list. These are companies we want to invest in as they provide the economic performance that underwrites long term investment return. Having identified such companies, it then becomes a matter of investing at an attractive price (in line with our valuation discipline ). In this regard we sometimes have to be patient.