The SCA Process
We believe in a bottom-up investment process. We don’t target specific sectors or geographies. Instead, we scour the globe for undiscovered companies with strong fundamentals with high growth potential.
Screening:
The SCA screen is 100% proprietary and unique to our firm.
It is a tool that was internally developed with the intention of quantitatively reflecting our investment philosophy.
The main components include:
ROA (the largest weight)
Sustainable growth from a sales, earnings, and cashflow perspective
Steady to increasing margin profile
We screen ~65,000 companies per year across industries and regions.
Company Due Diligence:
Direct meetings/calls with company management to assess:
Competitive advantages
Overall market opportunity
Management philosophy and ownership
We model our assumptions to formulate a forward-looking financial picture.
Valuation considerations allow for a degree of downside protection if the company’s growth underperforms.
We talk to over 200 unique companies annually.
Portfolio Construction:
Bottom-up, idiosyncratic approach with each position standing on its own merit.
50-70 holdings
Maximum sector weight 40%
Maximum country weight 40%
Risk Management:
We embrace company-specific risk, as our entire focus is trying to identify and understand risk and reward metrics for the companies we own.
Ongoing scenario analysis
Systematic communication with management
Automatic tracking of monthly, quarterly, and annual updates vs. our assumptions
Quantitative reviews of company metrics within the context of the portfolio
Periodic team reviews
Macro risk: unlike stock-specific risk, we try to avoid excessive macro and geopolitical risk by avoiding countries where those risks can overwhelm the bottom-up company dynamics.