WE BEGIN BY RELYING ON OUR OWN RESEARCH AS TO WHY A COMPANY MAY GROW PROFITABLY FOR THE LONG TERM.
RESEARCH THAT IS DILIGENT
We rely on our own research and only invest in situations where we have done the legwork ourselves. Our research takes us worldwide. Our due diligence covers speaking to customers, suppliers, competitors, industry consultants and ex-employees. We analyze financial reports and regulatory filings to newspapers and trade magazines. In most cases we visit the companies and always meet with management either directly or via conference call.
RESEARCH THAT IS COMPANY SPECIFIC
Our research is very company specific without regard to the big picture, which we consider to be unpredictable. We take into account long-term considerations and not short-term issues of market or economic cycles.
Uncover companies that have unique competitive advantages, are well‐capitalized, and offer long term organic growth.
Evaluate the income statement to understand future cash flow generation and operating leverage.
Gauge the quality and attractiveness for long term investment, with low possibility of disruption.
Know management well
Study the business model, the financial history, and the skills and focus of its management over time.
NEXT WE BUILD A DETAILED DISCOUNTED CASH FLOW MODEL TO ASSESS THE VALUE OF THE BUSINESS.
Our discount models project company revenue generation in the coming seven to ten years, backing out assumed expenses based on historical norms to uncover annual cash from operations. An assumption of capital expenditure is then applied, along with working capital adjustments, to arrive at free cash flow by year.
These cash flows are then discounted at a reasonable rate, based on the company and industry volatility, to derive what we believe to be the intrinsic value of the company.
We build models to:
Only highly profitable businesses at a rational price.
Assess fair value
Initial and continuous reassessment of the valuation, and integrating any new information, ensures an up-to-date benchmark for the fair value of the business.
Understand the business economics
Allows us to make independent, proprietary judgements; allows testing different scenarios to assess potential outcomes.
We endeavour to take advantage of short-term price fluctuations caused by either overly optimistic or pessimistic investors.
RISK IS NOT VOLATILITY — It IS THE PROSPECT OF PERMANENT LOSS OF CAPITAL.
All Laurus portfolios are constructed on a bottom-up basis which becomes the foundation of our portfolio risk and compliance structure.
Measured at the portfolio level; structural limitations include specific stock and sector weightings, liquidity, specific stock correlation, and valuation discounts.
Client portfolios are managed strictly to investment models and measured monthly by the compliance team to ensure uniformity across clients.
Measured monthly to ensure excessive activity is avoided and to measure the impact of trading against portfolio value.
WE BELIEVE INVESTING AS A TEAM ADDS VALUE TO OUR CLIENT’S PORTFOLIOS.
Our team has over 100 years of investment experience that is reflected in our decision making process.
Strength of conviction
Each investment thesis is subject to thorough and open debate by all portfolio managers.
Our individual skills and knowledge are complementary in valuation, methodology, and business analysis.
Long term patience will be rewarded.
As owners of our own business, we only have our clients’ long term best interest in mind.