We invest primarily in growth stocks but at times will supplement these with more mature, lower growth dividend stocks or cyclicals.
We invest in growth stocks that stand to benefit from long-term (secular) trends expected to last a generation or more. Trends include the growth of renewable energy; online services; artificial intelligence; the Internet of Things; cyber-security; medical technology; ageing populations in developed economies and China; and an expanding Asian middle class.
We focus on sector opportunities from long-term trends that offer attractive growth opportunities and identify stocks that display:
- Strong earnings growth; and
- Ability to defend their market position against competitors.
Allocation to growth stocks may at times be as high as 95% of portfolio value.
Dividends & Growth
We sometimes invest in mature stocks with lower growth prospects if there are strong distributions to shareholders, through dividends or buybacks, and attractive fair value.
Allocation is limited to a maximum of 30% of portfolio value.
We also at times invest in cyclical stocks if we expect strong appreciation. This includes gold miners, physical gold & precious metals, oil & gas, metals & mining, and construction materials.
Total cyclical allocation is limited to a maximum of 30% of portfolio value.
Cash & Fixed Income
We maintain a minimum 5% cash balance in the portfolio to cover contingencies.
Fixed income includes term deposits, fixed interest ETFs, corporate bonds and mortgages.
Allocation to this sector will vary depending on our assessment of market risk. At times of elevated risk, cash and fixed income may exceed 70% of portfolio value.
We use both technical and fundamental analysis to select stocks for investment.
We only buy stocks that have both a favorable fair value and a bullish technical outlook. As a general rule, we also only sell stocks when both fair value and the technical outlook are bearish. The exception to the sell rule is when we decide that global market risk is elevated and seek to reduce overall exposure to equities.
We calculate the fair value of stocks based on expected future cash flows using our proprietary payback formula.
We assess the technical outlook using proprietary Momentum and Buy/Sell indicators.
4 Replies to “Our Strategy”
Experience is invaluable in addressing the complexities of share behaviour. Probabilities are thus helpful considering whether to buy or sell a position.
I agree that analysis of share performance is not an exact science, and if it were we would all be fools not to be billionaires.
ANy thoughts on Electronic trading and its impact on the small investor (not a day trader).
I think high speed trading has destroyed investor confidence in the fairness of the stock markets. But the exchanges are making millions charging HFT for colocation/high-speed connections from the exchange. And will simply ignore the long-term harm they are doing …..until it is too late.
I agree with you Collin on HFT it scares me a little what is going on in the backgroud of the Exchange that we cant see or access.It is hard enough trying to evaluate a Co. with inside trading and not knowing if the directors are telling the truth.The only thing we really got is our charts. Regards Trevor
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