Investment Process

OUR KEY
INVESTMENT BELIEFS

  • Key One
    Financial markets, in general, offer mispricing opportunities that can be exploited in a disciplined manner.
  • Key Two
    All tradable and investable financial securities have a niche in the risk-return trade-off spectrum, from money market instruments to cyclical equities.
  • Key Three
    The key risk factor facing investors’ is the risk of permanent loss.
  • Key Four
    The financial environment is global and markets are, in the long-run, driven by the robustness of both the domestic and global economy. This underpins the earnings on which company valuations are based, as well as the interest rate environment in which money and bond markets function.
  • Key Five
    A top-down assessment of the major themes operating around the world is useful in understanding the valuations placed at any time on securities in markets.
  • Key Six
    Diversification and the understanding of the correlation of different sources of returns, important in constructing risk-adjusted portfolios.

OUR EQUITY INVESTMENT
PHILOSOPHY & PROCESS

At Counterpoint we believe that equity investing is most successful when it is most business minded. We view equities as ownership stakes in productive and dynamic enterprises. As such we conduct rigorous investment research into companies’ business models, industries, socio-economic environments and future prospects.

We believe that by focussing our efforts on companies with track records of sustained value creation and operating excellence, coupled with attractive prospective opportunities, we significantly increase the probability of achieving superior investment returns, while reducing the risk of sub-optimal outcomes.

Cardinal to profitable investing is the price paid relative to intrinsic value. We always take a long term view when estimating a company’s underlying worth. Valuations are fundamentally driven and based on long term estimates of future cash flows to shareholders. Critical to this process is an understanding of management’s ability to productively allocate capital in relation to acceptable hurdle rates, as ultimately this drives future value creation. These required rates of return are viewed within the context of the broader market and macroeconomic environment and need to be weighed against expected returns on competing assets and asset classes.

Our principal aim is to invest in quality companies at prices that are conducive to generating attractive risk adjusted returns over a sustained number of years.
Thorough analysis is performed on each investment, each being subject to stringent qualitative and quantitative criteria. Current and prospective positions are then vigorously debated by the investment team. Forecasts and valuations are stress tested under various operating and economic scenarios to present an informed picture of a company’s sensitivity to the risks and opportunities faced.
This provides insights as to what margin of safety should be built into valuations. The future is by nature uncertain and the risk of error needs to be astutely managed. Investments are at all times closely monitored for any changes that may affect their fundamental values while assumptions regarding investment cases are regularly re-tested for robustness.