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SLT Core Portfolio
Although we have historically covered more innovation-oriented stocks, we recently decided to create a core portfolio by following our fundamental investment philosophy: Quality-Growth investing.
We thought it would be interesting, while developing the investment process, to share with you on a regular basis the work we are currently doing. The first reason is for us to gather constructive feedback from the community, but we also think it could be interesting to follow us along our portfolio creation journey, from idea generation to fundamental analysis to portfolio construction.
Our investment philosophy seeks to identify quality-growth companies we believe can compound shareholder wealth at superior rates of return over the long term. These companies share the following characteristics:
- Competitive Advantage: strong industry position, enabling companies to earn better financial returns than competitors. Companies able to reinvest cash flows at higher rates of return usually attract competition which can erode margins and returns over time. Therefore, companies we are interesting in possess durable competitive moats enabling them to generate long-term superior returns. We are particularly sensitive to moats like proprietary technology, strong network effects, valuable brands, proprietary and valuable data, and scale.
- Sustainable and Structural Growth: companies operating in an industry enjoying secular growth have the potential to unlock compounding effect advantages. Indeed, we believe that companies able to reinvest their cash flow at higher rates of return in a fast growing and sustainable sector will likely see their valuation increase in the long run.
- Self-financed growth and Financial Strength: We are looking for companies with strong free cash flow (FCF) generation and less reliant on debt to fund business growth. It usually results in solid balance sheet with an all-weather financial capacity to operate hence, less likely to experience high volatility and losses during market downturns.
- Right Management Team: companies can seize on opportunities for growth, when led by the right management teams, who choose to reinvest in the business. We put emphasis on skillful managers with excellent capital allocation track record. We believe a quality management is composed of great leaders, with clear and long-term strategy, established culture, and consistent regard for shareholders.
We will share all the work done (studies, equity screener, company write-ups...) during the investment process development, in the hope that it can be beneficial to you. Again, any comments will be greatly appreciated.
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