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| GENERATING ALPHA — OUR APPROACH (Continued) |
DYNAMIC INVESTMENT APPROACH
Unlike buy-and-hold investors, we adopt a more dynamic approach to investing. Our decision to buy or sell a position is driven by a catalyst that is thought to influence a company's valuation:
- Core long positions are taken in companies which have a clear potential to appreciate and are well positioned within their respective sectors
- Core short positions are taken in companies which have a clear potential to depreciate and are poorly positioned within their respective sectors
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360 DEGREE ANALYSIS
We adopt a "360 degree" analytical approach to stock selection, based on:
- Detailed company analysis
- Contact with the company's management team
- Extensive industry research
- Competitor analysis
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COMPETITIVE POSITIONING
We analyse the competitive positioning of potential holdings using the following criteria:
- Business model and drivers of growth
- Market growth/industry trends and cycles
- Structure within industry (oligopolistic or fragmented)
- Pricing power versus competitors, customers, suppliers
- Entry/exit barriers, SWOT (strengths, weaknesses, opportunities and threats) analysis
- Research and development (R&D) intensity, product life cycles, substitutes
- Regulation and jurisdictions of potential investments
- Analysis of corporate structure (subsidiaries/de-consolidation)
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RISK MANAGEMENT
We have rigorous risk management measures in place and apply stop-losses or immediately take profits off the table to avoid losses. We minimise risk by:
- Knowing what market environment we are in, and respecting the market
- Knowing the stocks and sector we invest in
- Only investing in the best risk/reward situations
- Sizing the investment after risk/reward and level of conviction
- Continuously identifying risks that might invalidate our investment thesis, and always staying very liquid
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