WaveStone Capital follow a repeatable, four-step investment process:
- Step 1: Qualitative Filter: Identify businesses which exhibit Sustainable Competitive Advantage – each company is given a score out of 15 factors which identify its Superior Corporate DNA and the Industry Dynamics in which it operates.
- Step 2: Financial Analysis: Apply financial risk, growth and valuation tests
- Step 3: Risk Overlay: Overlay portfolio with risk controls
- Step 4: Portfolio Creation: Construct diversified, benchmark unaware portfolio
What is Superior Corporate DNA?
The cornerstone of WaveStone’s investment approach is to identify businesses which exhibit a Sustainable Competitive Advantage – businesses with superior corporate DNA operating within industries with favourable dynamics that deliver above market earnings growth.
Corporate DNA, or a company’s ‘genetic markers’, can indicate a company’s likelihood of success. There are seven markers including a company’s track record, logical expansion plans and its research and development effort. Once we have established whether or not a company has the Superior Corporate DNA attributes we then assess whether or not a company is facing headwinds or tailwinds in its industry.