Screening ensures we focus on the future - look through the windscreen rather than the rear-view mirror.
Script
Today we're talking about screens and idea generation. We screen for sustainable quality growth companies. We focus on companies that generate high returns on invested capital or have the potential to do so over the long term.
We like companies that have got an attractive structural growth profile. We like growth to be coming from revenues, not just profits. We also like companies that are able to grow organically, and have grown organically so far, rather than through acquisition.
If we come across companies that have had an acquisitive past, we focus on the capital allocation decisions, and assess whether these acquisitions have created or destroyed value. Typically, this tells us a lot about quality of Management, and as a rule we invest only in companies where we rate quality of management as high.
We like companies that have got a strong balance sheet to ensure that we focus on companies that are able to withstand any periods of crisis, such as the recent ones that we've gone through.
We like companies that have got a strong balance sheet to ensure that we focus on companies that are able to withstand any periods of crisis, such as the recent ones that we've gone through.
We also want to ensure that companies follow good accounting practices, so accounting is an important focus for us. And as a rule, we always only invest in companies where we're comfortable with your accounting practices. It is a way for us to protect our clients’ assets.
We have a strong focus on ESG as you know. And we focus on companies that have got strong governance, quality management, and have got good sustainable business models - both in terms of fundamental and social practices but also across a wide array of measures that we assess as part of our proprietary ESG framework. We will discuss the ESG framework in more detail in a future video.
Screening is also about ensuring that we point our focus forward to the future. Look through the windscreen rather than looking at the rear-view mirror. As a result, we have a proprietary thematic framework to help us think long term and think about the potential attractive structural opportunities out there.
We have identified three megatrends which are: Demographic Change, Future of Technology and Resource Scarcity. And we assess every company in terms of how exposed they are to the various themes within those megatrends and that helps us point our screen and our research efforts to finding this attractive structural growth opportunities. We will detail this thematic framework in a future video.
We typically focus our screening and research on companies that operate in attractive industry dynamics; industries where there are high barriers to entry and low competitive pressures. We like companies that have got strong compounding characteristics and strong pricing power.
Also, we focus on innovation and disruption. We want companies that have low disruption risk and have got strong innovation potential to ensure that they capture the long-term structural growth opportunities that we foresee.
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