Central to our investment philosophy is a strategy facilitating investment in well managed companies with a clear competitive advantage and growth potential, while managing the downside risk of portfolio investments as guided by the investment mandates of our clients.
We believe that a sound investment must have the following features:
- Sustainability of the business model
- Quality of management team and board of directors
- Balance sheet strength and clarity of cash generation
- Defensiveness - offering downside protection
- Price discount relative to its intrinsic value
Our selection process centres on the following issues:
1. Strong, Growing Cash Flow
We prefer investments with strong and growing cash flow. In our view, an appealing investment prospect must have identifiable growth prospects and clear competitive advantages. The competitive edge may be based on product, cost, market, service or management strengths. The businesses we generally consider are characterised by a stable earnings track record.
2. Clear Business Model
We appreciate long-term goals that are based on understandable business models and quantifiable revenue streams. It is imperative that management has the ability to set long term business targets.
3. Strong Business Fundamentals
The opportunity should have access to a large market characterized by rapid, high-growth. Ideally the underlying products or services should be proprietary in order to create barriers to entry.
4. Management Team
Management must possess operational experience and detailed knowledge of their market opportunity - including a thorough understanding of their competitors.
5. No Negative Surprises
Our rigorous research process enables us to understand an investment’s weaknesses as well as its strengths. Our conservative approach to earnings forecasting also limits downside risk.
6. Capital Requirements
We analyse capital requirements, either from equity and debt, or through generation of internal positive cash flow, in order to attain the optimal capital structure.
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