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Investment Approach

Global Equity Summary

CDAM's Global Equity strategy aims to invest in a low turnover, highly concentrated portfolio of attractively priced, fiscally conservative companies led by CEOs with exceptional capital allocation track records. The portfolio is biased toward mid/small cap companies with long holding periods.

Our investment process emphasises management's disciplined capital allocation track record, ownership alignment, ability to increase free cash flow per share and sustainable organic or inorganic growth. The resulting portfolio seeks to mitigate the risk of losses while providing attractive returns to long-term investors over an entire market cycle.

  • Region: Developed Markets
  • Style: Unconstrained
  • # Holdings: 15-25
  • Holding Period: Long-Term, Low Turnover
  • Market Cap: Small/Mid Cap Skew

Investment Process

  1. Investable Universe Our investable universe consists of publicly listed Developed Markets companies with market caps over $1 billion. We are unconstrained by sector or geography.
  2. Capital Allocation Analysis Proprietary models consider management's track record, ability to reinvest profits and the return on those investments.
  3. Fundamental Research Quantitative and qualitative analysis is applied to assess a company's runway for growth, industry economics, sources of competitive advantage and capital allocation. We closely track management capital allocation philosophy and investment behaviour.
  4. Total Shareholder Return and Valuation Analysis Valuations and total shareholder return are further assessed through financial modelling and scenario analysis. Investments are added to the portfolio when the business case is attractive, and the valuation is compelling.

Fundamental Research

1. Company Operating Model

  • Analyse the operating model to understand how the company works.
  • Assess the reliability of the cashflow production relative to the company’s history and peers.

2. Historical Compounding

  • Analysis of the capital allocation track record.
  • Detailed examination of the expansion or acquisition strategy.
  • Analyse the cost of capital vs. ROIC, and assess source of funds e.g. operating cashflow, equity and debt.
  • Review past M&A activity.

3. Future Compounding Ability

  • Map the company’s Total Addressable Market (“TAM”) for organic and inorganic growth.
  • Evaluate the TAM for size, accessibility, fragmentation, stickiness, cycles, culture, and regulation.
  • Project the ability of the company to take advantage of the TAM at past ROIC levels.

4. Management Profile

  • Prioritise CEOs that are experienced capital allocators.
  • Obtain an in-depth understanding of their capital allocation philosophy.
  • Identify patterns in management’s language.
  • Assess the CEO and management alignment through share ownership.

5. Valuation

  • Analyse the current valuation and the anticipated 5-year valuation.
  • Valuation methodology will vary depending on the company type.
  • Invest at a price that ensures multiple compression does not act as a headwind to earnings growth.

6. Portfolio Management

  • Analyse how the potential investment affects the characteristics of the portfolio.
  • Check correlations inside the portfolio and to relevant indices.
  • Assess whether the potential investment enhances the portfolio sufficiently to be included.

Investor Utility

Our investors typically use our strategy as a return generator in their satellite portfolio or as an unconstrained alpha strategy in a portfolio of managers.

We work with long-term investors who share our values and belief in fundamental investing.

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