The Company will invest in equities on a global basis. The Company’s approach is to be a long term investor in its chosen stocks. It will not adopt short-term trading strategies. The Company has stringent investment criteria which the ACD and Investment Manager adhere to in selecting securities for the Company’s investment portfolio. These criteria aim to ensure that the Company invests in high quality businesses which in the opinion of the ACD and Investment Manager are those:
- high quality businesses that can sustain a high return on operating capital employed;
- businesses whose advantages are difficult to replicate;
- businesses which do not require significant leverage to generate returns;
- businesses with a high degree of certainty of growth from reinvestment of their cash flows at high rates of return;
- businesses that are resilient to change, particularly technological innovation;
- businesses whose valuation is considered to be attractive.
Investors should be aware that the application of these investment criteria significantly limits the number of potential investments for the Company's portfolio. It is envisaged that the investment portfolio will be concentrated, generally comprising between 20 and 30 stocks. The Company will not invest in businesses which have substantial interests in any of the following sectors:
• Aerospace and Defence
• Brewers, Distillers and Vintners
• Casinos and Gaming
• Gas and Electric Utilities
• Metals and Mining
• Oil, Gas and Consumable Fuels
In addition, the ACD and the Investment Manager apply further criteria to screen investments in accordance with the ACD's sustainable investment policy. The ACD evaluates sustainability in the widest sense, taking account not only the companies handling of environmental, social and governance policies and practices but also their policies and practices on research and development, new product innovation, dividend policy and the adequacy of capital investment.
Portfolio Comment for March 2020
We used the market volatility over the past month to start a new position in a company which has been particularly affected by events. We have also published a letter to shareholders regarding recent events which can be found here. The top 5 contributors in the month were Coloplast, Clorox, Kone, Microsoft and Reckitt Benckiser. The top 5 detractors were Marriott, Amadeus, Stryker, Sage and Intertek.
Just a small number of high quality, resilient, global growth companies that are good value and which we intend to hold for a long time, and in which we invest our own money.